Is Insurance for an Old Car Necessary?
Written by
Ann Herro has been writing about insurance and employee benefits for over 15 years. She covers topics ranging from car insurance to healthcare costs.
Full coverage car insurance includes liability insurance, comprehensive insurance, collision insurance, and other optional types of insurance coverage. Your state may require you to always carry liability insurance. But what about comprehensive and collision, which cover physical damage to your own car? When is it okay to have a liability-only policy?
We answer when it's okay to drop full coverage on your car. If you're in this situation, it's best to consult an independent insurance agent who can show you all your coverage options and potential savings.
What Is Full Coverage Auto Insurance?
Full coverage auto insurance is a phrase used to designate an all-inclusive car insurance policy that includes several valuable coverage types. It provides you with significant protection from liability claims and vehicle damage.
There is no single definition or package of coverage for a full coverage auto insurance policy. While every state requires drivers to carry a minimum amount of liability coverage, most experts agree that a full coverage auto insurance plan should not only cover the state minimum liability requirements but also should offer you some protection from physical damage to your vehicle.
- Liability coverage protects you from damage you cause to other cars and drivers in an accident for which you are at fault. It includes bodily injury and property damage liability coverage.
- Physical damage protection for your vehicle includes both comprehensive and collision coverage. Comprehensive coverage reimburses you for damage to your car, such as broken glass, theft, vandalism, hail, and more. Collision coverage protects you from damage caused by direct impact in an accident.
Some will say that the combination of comprehensive, collision, and liability coverage is full coverage auto insurance. Others consider full coverage to include a variety of other options (e.g., uninsured motorist coverage, roadside assistance coverage, etc.) that enhance your protection.
Why Do People Drop Comprehensive and Collision Coverage?
If you have an older or low-value car, it may not be worth it to continue paying for comprehensive and collision coverage. These optional coverages pay for damage to your own car if you're in a crash or if your car is stolen or damaged by something like hail or a falling tree.
If your car is financed, your lender likely requires comprehensive and collision. If, however, your vehicle is paid in full, you can consider dropping them. If your car is damaged by something other than someone else being at fault for a collision, you'll pay the damage out of your own pocket.
When is it okay to drop collision coverage?
If your vehicle is paid off, there are a few circumstances when dropping collision coverage may be the right move:
- Your vehicle is worth less than a few thousand dollars: If you have a low-value car, collision coverage might not be worth the extra expense on your insurance bill., particularly if you have a large deductible. Let's say your car is worth $2,000, and your policy has a deductible of $1,000; your car insurance can only pay out up to $1,000 on a collision claim.
- Your car is kept in storage: If your vehicle is garaged or in storage, you don't need collision coverage. (Remember, comprehensive coverage is necessary in these situations because it protects your vehicle against theft, vandalism, fire, and weather-related issues that can occur in the garage or storage facility.)
When is it okay to drop comprehensive coverage?
There are a few instances when dropping comprehensive coverage makes sense.
- You have a low-value car: You can consider dropping comprehensive coverage if your vehicle's value is lower than a few thousand dollars. When you factor in your deductible, the potential payout, and the cost of the coverage, you can decide if dropping the coverage is the right move.
- You have an older car: Since most older cars have lost much of their value, it often doesn't make sense to keep up your comprehensive coverage. This doesn't hold true, however, if you're talking about a classic car or a rare car that has held or even increased its value.
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How Can an Independent Insurance Agent Help?
Everyone's situation is different. While these are basic guidelines, it's not always clear if you should drop any coverage on your car.
That's why you need an expert who can help you understand the benefits and risks of any coverage changes you decide to make. When you need help purchasing a new car insurance policy or making changes to what you already have, get in touch with a local independent insurance agent. These agents can access multiple insurance companies to get you what you need. They'll also provide personal advice and service to give you peace of mind.