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Insurance Advisor at Oliver L.E. Soden Agency, Inc

Should You Drop Full Coverage Auto Insurance?

Most advice from insurance professionals comes in the form of increasing coverage, but there are times when you can scale things back. Usually when your car is old and paid for, you can drop full coverage. The reason for this is because carrying full coverage on an older vehicle can be costly. You may end up paying more in monthly premiums than the car is actually worth.

 

Let’s discuss the pros and cons to dropping full coverage auto insurance so that you can make the best decision for your needs and budget.

 

What Will You Be Giving Up?

 

Before you drop full coverage, understand what won’t be covered. When talking about full coverage, it means you have liability, collision and comprehensive on one insurance policy.

 

  • Liability: Protects another person and their property if you cause an accident.

 

  • Collision: Covers damage to your vehicle if it’s involved in an accident.

 

  • Comprehensive: Covers just about anything else that isn’t the result of a crash.

 

Full coverage isn’t as “full” as you may think it is. Things like towing, roadside assistance, rental car coverage and other add-ons are generally not included with full coverage unless you ask to have them added. Therefore, when you drop full coverage, all you are getting is liability. You will be giving up coverage on your car, as well as other perks you may enjoy (i.e., roadside assistance).

 

How Much Has Your Car Depreciated?

 

Unfortunately, cars don’t go up in value. They only depreciate, so it’s not a bad idea to figure out how much your car is worth these days. Some financial experts say to set the bar at $5K, so if your car is worth $5K or less, it’s probably a good idea to drop full coverage. Check out Kelley Blue Book to determine the value on your car, and if you can’t find your model, have your vehicle appraised.

 

Consider Dropping Collision Only

 

If you’re on the fence about dropping full coverage, you may want to start by dropping collision only. You won’t be covered if you’re involved in an accident, but at least you’ll be covered for freak accidents, such as if a tree falls on your car.

 

Another thing you can do is raise your deductible if you want to keep coverage. This will lower your monthly insurance costs while allowing you to keep your policy as-is. Still, you’ll want to look at the numbers to make sure they are realistic. If your car is only worth $1K and you put your deductible at this amount, it doesn’t make sense to have full coverage. You’ll end up having to pay out $1K in the deductible, so you might as well save the money each month.

 

Dropping full coverage auto insurance may be a smart move if your car is paid for and worth less than the $5K mark. However, things aren’t always black and white when it comes to automobile insurance, so don’t hesitate to reach out to Hal Soden to discuss the details of your policy.