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UPDATED: Mar 4, 2020
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Full coverage car insurance can be great to have and might save you a lot of money in the long run. Although it is a good idea to have it in many situations, it is not the best idea for everyone. In certain circumstances, it is not worthwhile to have full coverage.
You can compare car insurance quotes from companies around you just by filling in your ZIP code here.
For some drivers, having full coverage is a waste of money. Although car insurance is imperative to have, you may be better off having just certain types of coverage. This article will answer questions relating to full coverage insurance and when it may be a good idea not to have it.
What does full coverage car insurance cover?
Full coverage insurance usually refers to comprehensive and collision coverage. It is meant to cover physical vehicle damage that is caused by fire, theft, weather, or animals, as well as damage that results from an accident that you caused.
If you have full coverage, it will pay off the balance of your car loan or will pay the car’s market value to you.
If you have more questions about full coverage car insurance or would like more details you can go to the National Association of Insurance Commissioner’s website.
When should you have full coverage car insurance?
If you have purchased a new car and had to take a loan out for it, your lender will probably require that you have full coverage. If you leased a new car, the company that leased it to you will also more than likely require you to show proof of full coverage.
Even if you paid cash for a new, or fairly new, car, it would be a good idea to have full coverage car insurance.
If you were to be in an accident and did not have full coverage, there is a pretty good chance that you would be responsible for the damage to or the replacement of the car, which would be a lot of money for which you are personally responsible.
Because full coverage pays for the market value, if it is a new car, your insurance company will be able to pay for most, if not all, of a new car for you to replace the damaged one.
When should you not have full coverage car insurance?
One big thing to consider when deciding whether or not to add full coverage to your car insurance policy is the cost. It is quite pricey to have full coverage on your vehicle.
If you have an older car that is paid off and not worth a lot of money, this may be a good time to cancel your full coverage if you currently have it, or choose not to add it to your policy if you are getting a new policy.
If your car is not worth a lot, the amount your insurance company is responsible for may not be a lot because you need to pay the deductible before the insurance company begins contributing. Once it stops making financial sense to continue to have full coverage, you should not have it.
One way to help you decide whether or not to continue your full coverage policy is to figure out how much your deductible is, as well as the amount you pay for your coverage.
Next, look up the cash value of your car. You can find this in Kelly’s Blue Book.
If what you pay for your premium and deductible is equal to or more than the cash value of your vehicle, it does not make sense financially to continue with full coverage car insurance. Keep in mind that you still need to have at least the basic insurance requirements of the state to be legally able to drive your car.
A better way to protect yourself against damage expenses is to open a separate savings account for your car.
If you decide to cancel your full coverage policy, take the money that you were paying your insurance company and put it into your account instead. This way, if you are in an accident, you will have some money available to help pay for it.
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