When Should You Drop Full Coverage On Your Car?

Full coverage auto insurance is typically required until you finish an auto loan or lease term. It’s wise to drop full coverage when the cost of insurance is equal to or more than the cost to replace your car if it’s totaled in a car accident or if you can afford to pay for damages out-of-pocket. Dropping full coverage removes collision and comprehensive insurance from your policy, resulting in more savings but less protection. Unless you can afford to pay for damages or theft of your car out of pocket, you should probably maintain full coverage.

Keep reading to see when else you should drop full coverage and when you should maintain it.

Reasons To Drop Full Coverage on Your Vehicle

Whether or not you drop full coverage will depend on your car’s fair market value, your annual mileage and your ability to cover out-of-pocket costs, among other factors. A car worth $3,000 or less, for instance, doesn’t need full coverage.

Your Car Doesn’t Hold Much Value

The value of a vehicle depreciates quickly once it's been purchased, usually around 20% after the first year. It will continue to depreciate as it ages and as you put more miles on the odometer. Eventually, the cost to replace your car will outweigh the insurance payout you'd get from a covered accident. At this point, consider dropping optional coverages like comprehensive and collision from your insurance plan and pocket the savings.

A car worth $2,000 or $3,000 doesn’t need full coverage.

Your Car Is Worth Less Than Your Full Coverage Policy

It's possible that the amount you pay for a full coverage insurance policy outweighs the value of your car. Things like time and usage will depreciate the value of your vehicle. Dropping some of your coverage can help balance the financial scales.

Your Vehicle Is Worth Less Than Your Deductible

The deductible is the amount of money you pay out-of-pocket before your insurance kicks in. Most parts of your full auto coverage policy have their own deductible that needs to be paid in the event of a covered accident. If your vehicle has gotten to the point where its value is less than what you’d pay towards your deductible, you may want to drop some of your existing coverages, such as the collision and comprehensive parts of your plan.

You Don't Drive

You can drop the liability coverage from your policy if you’re not going to drive and buy a comprehensive only policy. You can also consider getting rid of your collision coverage if your vehicle is stored in a secure and private facility, such as a personal garage. Your uninsured/underinsured motorist protection can also be dropped since your car won’t be on the road. With a comprehensive-only policy, you’ll save money, retain protection and you won’t have a lapse in coverage, which will raise your rates when you do drive again.

The Vehicle Isn’t Used Often

If your vehicle isn't being driven much, keep state requirement coverage but drop the collision coverage and the comprehensive coverage so you can save some money.

You Have the Money To Cover Costs

Those with the means to cover damages to their vehicle without having to rely on insurance will not need full coverage auto insurance. Comprehensive and collision are optional, unless you have a car loan or lease.

You're Confident in Your Driving Skills

If you think you can avoid mishaps on the road, cancel collision coverage and save on your insurance plan.

You Can't Financially Handle Paying for Full Coverage

Insuring your vehicle costs money. The more coverage you have on your policy, the more it will cost to insure your vehicle. If the cost for full coverage becomes too great, drop your collision and/or comprehensive coverage from your plan. Doing so will help save you money while still allowing you to drive your car.

Full coverage auto insurance is typically required until you finish an auto loan or lease term.

Get an Affordable Liability Auto Insurance

When Should You Keep Full Coverage for Your Vehicle?

  • Your vehicle is financed or leased - You may not always have a choice in whether you can drop your full coverage. Drivers who are financing or leasing their vehicle may be required to have full coverage by the applicable agency.
  • Peace of mind - There is something to be said about driving down the road and knowing your vehicle is covered no matter what life throws at it. Having full coverage for your car means you can drive with confidence without fretting over whether it might be in an accident with another car or be damaged by falling debris.
  • You drive a high-value vehicle - Vehicles that are worth a lot of money should have full coverage because they cost a lot to fix and maintain. If you get in an accident, and your vehicle is damaged or totaled, you'll want full coverage so your vehicle can be repaired or replaced without you having to dig too deeply into your wallet.
  • You just bought a brand new car - Your vehicle is going to be at its most valuable when you first buy it. This means replacing or repairing your car is going to be expensive. With the average cost of a brand-new car hitting an all-time high of $47,000, making sure your vehicle has full auto coverage is crucial.

You can drop the liability coverage from your policy if you’re not going to drive and buy a comprehensive only policy.

Full Coverage FAQs

Is having full coverage on a car worth it?

It may be worth having full coverage on a car if your vehicle is new, valuable or you don't have the out-of-pocket funds to pay for repairs or for a replacement vehicle.

Does it make sense to have full coverage on an older vehicle?

It makes sense to have full coverage on a classic car that continues to hold substantial value as it gets older. Older cars worth less than a couple of thousand dollars don’t need full coverage.

What is the difference between full coverage and comprehensive?

“Full coverage” refers to an auto policy that includes liability and other state minimum requirements as well as comprehensive and collision coverages. Comprehensive is an insurance type that covers theft, vandalism and other non-collision-related losses to your vehicle.

Key Takeaways

  • Consider dropping your full coverage if the cost to replace a vehicle outweighs the insurance payout you'd get from a covered accident.
  • Drivers can drop all other coverages from their policy and maintain a comprehensive-only plan if they don't drive their car.
  • Keep full coverage if your vehicle is being financed, is high value, is brand new or you can't afford to pay out-of-pocket for repairs caused by an accident.

If you need your state's legal amount of auto coverage or you're looking for a full auto policy, SmartFinancial has you covered. Enter your zip code below or call 855.214.2291 to compare multiple companies and receive free auto insurance quotes in minutes.

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