When to Drop Full Coverage Insurance on an Older Car

What Does Full Coverage Car Insurance Cover?

When people use the term full coverage car insurance, they're usually referring to a policy that includes the coverage types your state legally requires, plus protection for physical damage. These are typically:

• Liability coverage: Required by law in nearly every state, liability coverage provides financial protection if you're at fault in an accident. It helps pay for other people's medical expenses due to accident-related injuries and the cost of repairing damage to their vehicle and other property. Liability also covers your legal fees if someone sues you after an accident. It doesn't cover injuries you or your passengers sustain or repairs to your vehicle.
• Comprehensive coverage: Comprehensive can be a valuable addition to your policy, but it isn't required by law in any state. It helps pay to repair damage to your vehicle after non-accident-related events, such as severe weather, theft, vandalism, falling objects and more.
• Collision coverage: This type of coverage helps pay for repairs to your vehicle after an accident, regardless of who is at fault. Like comprehensive, no states require drivers to maintain collision coverage.

Tip: Depending on your state, you may also be required to maintain uninsured/underinsured motorist, personal injury protection (PIP) or medical payments (MedPay) coverage.

Is Full Coverage Insurance Required on Financed Cars?

The short answer is usually yes, full coverage is required if you have an auto loan because maintaining comprehensive and collision coverage helps protect the lender. Lenders typically require drivers to maintain both types of coverage until the loan is paid off or lease is up.

When you have these coverages, the insurance company pays for vehicle repairs (after you meet your deductible) if the damage results from a covered incident. If the insurance company declares your car a total loss, the insurer sends the lender a check for the car's actual cash value, minus your deductible. You're responsible for the remaining amount if the insurance payout isn't enough to pay off your loan or lease balance.

When to Drop Comprehensive and Collision Coverage

Once you've paid off your car, you can drop comprehensive and collision anytime, but that doesn't mean you should. Keeping the coverage may be a better financial move because it can help reduce your out-of-pocket expenses after an accident or other mishap that damages your vehicle. However, there are times when dropping them may make sense.

• Your car's not worth much. The insurance company typically only pays for repairs up to the car's current market value. If your vehicle isn't worth more than a few thousand dollars, the payout you'd receive from the insurance company if you filed a claim may not be worth the cost of keeping the coverage.
• You have a high deductible. Comprehensive and collision coverage come with deductibles, typically ranging from $100 to $2,000, that you must pay before your insurance coverage kicks in. If yours is on the higher end, compare the payout you'd receive from the insurer with the out-of-pocket costs (including policy premiums) you'd be responsible for to determine whether keeping the coverage makes sense.
• You no longer drive your car. You can't get into an accident if you don't drive. If your vehicle sits parked in your driveway, dropping collision may be a good idea. However, you might want to hang on to comprehensive because it covers repairs for damage not caused by an accident, like flooding or a fallen tree limb.
• You're covered by someone else's policy. If you live with someone who lists you on their auto insurance policy, and it includes comprehensive and collision, dropping your coverage may be a good option.
• You can afford repairs or a replacement. If you could pay for repairs or a replacement vehicle out of pocket, paying for the extra coverage may not be worth it.
• You wouldn't repair your vehicle. If you wouldn't repair your vehicle even if it was damaged, maintaining comprehensive and collision may not make sense. If you eliminate the coverages, you won't get a payout for the actual cash value of your vehicle if the insurance company declares it a total loss. Weigh the benefit of receiving a potential payout with the cost of maintaining the coverage.

Tip: Don't assume that just because your car is older it isn't worth maintaining comprehensive and collision. Check your car's current value before dropping coverage for physical damage.

The Bottom Line

Insurance rates have risen steadily since 2021, so it can be tempting to drop coverages like comprehensive and collision that aren't required by law to help you save on your premium. In some cases, that might make sense. In others, it could end up costing you more in the long run if you're in an accident or need repairs for non-accident-related damage.

If auto insurance is stretching your budget, ask your insurer about discounts you may qualify for and shop around to see if you can get a lower rate for the same coverage from a different provider. Experian's auto insurance comparison tool can help you compare pricing and find affordable coverage.

If you ultimately decide to remove comprehensive and collision coverage from your policy, be sure you understand the financial implications of doing so and have a plan to pay for repairs or a new vehicle if necessary.