When should you drop full-coverage auto insurance? One rule of thumb is to drop full coverage when your annual premium payment equals or exceeds the amount your insurer would pay out if your vehicle needed to be repaired or replaced.
Two other rules you may have heard are to drop full coverage when your vehicle is five or six years old, or when your auto’s odometer surpasses 100,000 miles.
There’s more to figuring out if you should drop full coverage on a car than this, as you’ll learn here. Specifically, this article will tell you:
- When to drop full coverage
- When to drop collision coverage
- When to drop comprehensive coverage
- Do you need full coverage on an old car
When should you drop full coverage on your car?
You should drop full coverage on a car, or at least consider it, if:
- The car is old, or older.
- The car has a lot of miles on it.
- The car isn’t worth much.
- You don’t drive much.
- You can afford to pay for repairs out of pocket.
- You plan to replace your car soon.
The information below explains why you may want to stop full-coverage auto insurance — which usually includes liability, collision and comprehensive coverages — in these situations.
The car is older
Older cars usually aren’t worth much. Compare your vehicle’s value with what you spend on auto insurance per month or per year. If your policy costs the same as or more than the payout you would receive after an accident, you might be better off with just liability coverage.
The car has a lot of miles on it
Cars with a lot of miles on them usually are worth less than cars with relatively few miles. If your full-coverage insurance policy won’t pay out much should you need to repair or replace your vehicle, you should consider dropping collision and comprehensive coverage.
The car isn’t worth much
There are few reasons to keep full coverage on a car that isn’t worth much. Depending on how little your car is worth, you might pay more for your policy in a year than it would pay out if it’s damaged in a crash or through some other means. In this case, saving the money you spend on premiums may be the better option.
You don’t drive much
The less you drive, the less likely you are to get into an accident. And the less likely you are to need full coverage. However, you may still need or want comprehensive coverage if you don’t regularly park your vehicle in a garage.
You can afford to pay for repairs out of your own pocket
If you have an ample emergency fund, you might be better off dropping full coverage. Then you can save the money you would spend on comprehensive and collision coverage and use it to pay for repairs out of pocket should something damage your vehicle.
You plan to replace the car soon
Would major, or even not-so-major, damage or repairs push you to replace your vehicle? If so, you might not need full-coverage car insurance. Instead, save the money you would spend on premium payments and put it toward your eventual replacement.
Some of the situations highlighted here work together. You may not want to drop full-coverage car insurance simply because your vehicle is older or has a lot of miles on it, for example. But dropping full coverage might make a lot more sense if your vehicle is older, has a lot of miles and isn’t worth much.
When should you keep full coverage on your car?
You should think twice about dropping full coverage if:
- You financed or leased the car.
- Your car is new, or newer.
- Your car is worth a lot.
- Your car is expensive to repair.
- Repairing or replacing your car would be tough financially.
- Dropping comprehensive and collision coverage would make you uncomfortable.
The information below explains why you might want to take full coverage off a car in these situations.
You financed or leased the car
Most lenders or leasing companies require you to carry collision coverage, comprehensive coverage or both until your loan is paid off or your lease is up. So, dropping full coverage may not be an option if you finance or lease your vehicle.
Your car is new, or newer
The newer your vehicle, the more you’ll want to keep full coverage on it. Newer cars are worth more than older ones, which means you could be on the hook for high out-of-pocket repair or replacement costs if you’re in an accident and don’t have collision or comprehensive coverage.
Your car is worth a lot
Your car can be worth a lot even if it’s not new or newer. Certain makes and models retain their value better than others. If your vehicle is one of these, keeping full coverage on it would be wise unless you have a healthy amount of savings.
Your car is expensive to repair
Some vehicles cost a lot more to repair than others. If replacement parts for your car tend to be expensive, you might want to keep full coverage on it longer than you would for a car that’s cheaper to repair.
Repairing or replacing your car would be tough financially
Dropping full coverage means paying to repair or replace your car out of your own pocket. If you can’t afford that, you shouldn’t drop comprehensive or collision coverage until you can.
Dropping collision and comprehensive coverage would make you uncomfortable
Even if you can afford to repair or replace your vehicle out of your own pocket, you may not want to do so. If you would feel unprotected, uneasy or uncomfortable without the protection of full-coverage car insurance, keep it. You might want to consider raising your deductible, though.
There are no right or wrong answers when it comes to the question, when should I keep full coverage on my car? The same is true of the question posed earlier, when should I drop full coverage on my car?
Weighing the situations above, though, should help you settle on the best solution for you.
When should you drop collision coverage on your car?
You might want to drop collision coverage on your car if:
- Your car isn’t worth much.
- You don’t drive much.
- You can afford to repair or replace your car out of your own pocket.
Collision coverage protects you if a collision with another vehicle or even a stationary object damages or destroys your car. It also protects you from hit-and-run incidents.
When should you drop comprehensive coverage on your car?
You may want to drop comprehensive coverage on your car if:
- Your car’s value is lower than your comprehensive deductible.
- You’re one repair bill away from replacing your car.
- Your car is older and regularly protected from weather, tree branches, animals and the like.
Comprehensive coverage protects you if something other than a collision damages or destroys your car. The “something other” in this case could be an animal, a falling object, a natural disaster, a weather event or vandalism.
Should you carry full coverage on an older car?
Older cars are less likely to need full coverage than newer cars because older cars are usually worth a lot less than newer cars.
If your car is worth less than what your auto insurance policy would pay out after a claim, you probably don’t need full coverage. Liability coverage may be enough for you in this situation.
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