When Should You Drop Full Coverage?
There are many factors to consider before dropping coverage other than liability from your auto insurance. For one, if you’re leasing or still paying on a car you financed, then you’ll likely be required to have full coverage. Another thing to consider is how much financial protection you want or might need against the unexpected. And of course, keep in mind how much your car is worth.
“If you own a vehicle that’s still worth a significant amount of money, you absolutely want comprehensive coverage,” says Clark.
A general rule in the auto world is this: If the cost of comprehensive and collision exceeds 10% of your vehicle’s value, it’s time to dump them and have liability coverage only. When you’re ready to calculate your car’s value, you can use sites like Edmunds, Kelley Blue Book (KBB) or NADA. Then plug that value into the formula below.
When To Drop Comprehensive & Collision Coverage
Coverage Cost ≥ 10% of Car’s Value = Drop Comprehensive and Collision
But before you rush and drop these coverages, there’s one exception to keep in mind. If you know you can’t afford to cover the cost of repairing or replacing your car, forget the math and keep your coverage.
Final ThoughtsA key difference between liability and full coverage insurance comes down to who your insurance will compensate after an accident. With liability, insurance will pay others when you’re at fault for an accident. Full coverage ensures that you can also receive financial compensation to repair or replace your car.
If you’re leasing your car, it’s still being paid on, or it’s quite valuable, then you probably need full coverage. But if you own your car free and clear and the cost of comprehensive and collision is more than 10% of your vehicle’s value, it might be worth considering liability only.
Liability vs. Full Coverage: Which Auto Insurance Do You Need?