It is deer season: should I have coverage on my inexpensive car?

Saving money on auto insurance can cost you during the deer season.

Are you looking for ways to save money? With the holidays just around the corner, we could all use a little extra savings to help us “shop until we drop” when the gates open and the retailers drop the flag for the latest deals online or in the store. Auto insurance can be very expensive, and if you are driving an inexpensive car, you may be tempted to save as much money on auto insurance as you are able. However, before the holiday shopping season begins, we in Michigan and throughout the Midwest know that deer season is first. According to the Michigan State Police, each year there are nearly 50,000 reported vehicle-deer crashes. Your “clunker” or “beater,” whatever you may affectionately call your inexpensive car may serve the simple task of getting you back and forth from work. What if one of Michigan’s two million deer runs out in front of you? Your otherwise reliable transportation may be gone in an instant.

Michigan, like other no-fault insurance states, requires us to carry insurance on our cars. However, the type and amount of coverage can vary greatly. The required insurance is personal injury protection (PIP) and property protection insurance (PPI). Personal injury protection covers reasonably necessary medical expenses that one may incur from personal injuries due to an auto accident as well as a limited amount of lost wages. Property protection insurance covers up to $1 million for damage your car does to other people’s property in Michigan (see Your Guide to Automobile Insurance for Michigan Consumers for more details).

The basic coverage does not cover damage to your vehicle. You will need to purchase more expensive insurance to cover damages to your personal vehicle. The cost of the insurance coverage can vary greatly. Many factors determine the cost of auto insurance including the type of vehicle you own, your driving record, your age or your length of driving experience. In addition, insurance companies offer discounts. For example, you may receive a discount for being a good student or having a good credit score. For more information on reducing the cost of your insurance or receiving discounts in Michigan, see the helpful consumer information sheet “How to Reduce the Cost of Your Car Insurance.”

If you are driving an inexpensive car, the temptation may be to buy the cheapest policy available. For example, why pay a lot more to cover a car that is only worth $3,500 or less? However, as stated earlier, what if you lose it due to an accident? Do you have a $3,500 emergency fund or car replacement fund available to buy another inexpensive car? If not, you have a problem for sure. To avoid such a problem, you may want to reconsider your insurance coverage. Insurance is simply transferring risk. If you have money set aside to replace your vehicle when it is totaled, you can bear the risk. If you do not, you may want to have an insurance company bear the risk by paying them to do so. You may not have the money to buy full collision coverage, but ask your insurance company about a comprehensive policy that would include coverage for a collision with a deer. This type of coverage may be worth it this deer season.

Michigan State University Extension offers a variety of money management programs throughout the state of Michigan. For more information, check out their Personal Finance information.

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