Safely Dropping Full Coverage

To see if you should drop full coverage car insurance, subtract your deductible and full coverage rates from the value of your car. If you can't pay that amount, don't drop full coverage.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: May 26, 2021

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Here's what you need to know...

  • It is important to understand what the types of coverage mean and how they are beneficial to you
  • Full coverage does help to protect you against a lot more than just damage to another driver’s vehicle
  • You need to consider your deductible amount when determining whether to continue carrying full coverage

Although full auto insurance coverage is smart to carry in many instances, there are times when it is a good idea not to carry it.

When you insure your car, you have the option of what types of coverage you would like to have that will help protect you financially if you are ever in an accident. You can choose comprehensive auto insurance, basic coverage, or other coverage that is more extensive.

In order to choose the right amount of coverage, it is important to understand what the types of coverage mean and how they are beneficial to you. Because each type is priced separately, your car insurance rate will vary depending on how much coverage you choose.

When should you drop full coverage insurance? Price is one reason why you should avoid carrying full auto insurance coverage but there are other reasons as well.

It’s easy to look into car insurance rates just by entering your ZIP code into the FREE quote tool above !

Minimum Insurance Required

Although you can sometimes get away with not carrying full coverage, you are not allowed to forgo car insurance altogether. The majority of states require all drivers to carry some type of coverage that will help to cover them financially in the event of an at-fault accident.

The minimum coverage that is mandated varies according to which state you live in. The National Association of Insurance Commissioners can guide you to your state insurance department to find out your state’s particular requirements.

The bare minimum levels vary widely from state to state.

Most states require that you at least carry liability coverage on your car. This type of coverage will help pay for damages to the other party if you are the cause of an accident. It will cover not only property damage but also any injuries that occurred.

Liability coverage does not cover any damages done to your car or any of your injuries, which is why some people choose to purchase coverage that is more extensive. This is where full coverage comes in.

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Full Coverage

Full coverage does not necessarily mean that you are completely covered in the event of an accident. It does help, however, to protect you against a lot more than just damage to another driver’s vehicle.

When insurance companies advertise full coverage, it generally includes:

  • State mandated coverage
  • Physical damage coverage to your own vehicle
  • Uninsured motorist coverage
  • Some type of medical payment coverage

There are two types of physical damage coverage: comprehensive and collision. Collision helps to pay for damage done to your vehicle from colliding with another car or object, even if the collision was your fault.

What is comprehensive car insurance? Comprehensive covers damage done to your vehicle from something other than a collision, which could include fire, hail, a fallen tree, vandalism, or theft.

With both of these types of coverage, there is a deductible that needs to be met. This refers to the money you will pay out of your own pocket before the insurance company will start to pay for damages. The lower the deductible you choose, the higher your insurance rate will be.

You may think that since drivers are required to carry car insurance that you would not need to purchase insurance to protect you from uninsured drivers. Unfortunately, this is not the case.

Around 14% of the population continues to drive without insurance, as reported by the researchers at the Insurance Research Council.

If you were to get into an accident with someone who did not have insurance, you would be responsible for any damages to your vehicle and any of your injuries. Uninsured motorist coverage covers these expenses for you, so it is not a bad idea to add this coverage to your policy.

It also protects against underinsured motorists, who are often those driving around with just the minimum insurance requirements.

Medical coverage is known as medical payments or personal injury protection, depending on which state you live in. This helps to cover injuries that occurred to you and your passengers in an accident, often no matter who was at fault.

For more information about the types of coverage available, visit the Insurance Information Institute website.

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Price

Saving money is sometimes a good reason to stop paying for full auto insurance coverage. Your policy rate is partially determined by the coverage that you choose, as each one is priced on its own.

Comprehensive coverage and collision are two of the highest-priced types of coverage available, making up nearly half or your premium when combined.

Not carrying either one will decrease your rates quite a bit.

That being said, it is not always the best move to remove those types of coverage. If you drive a car that has higher repair costs than others or would cost a lot to replace, it would be a good idea to continue to carry comprehensive and collision coverage until the value of the car decreases.

If you are considering dropping full coverage because of the money you would save, but don’t feel comfortable going without full coverage there are other things you can do to save a few bucks.

The Insurance Information Institute provides other tips on how to save money on your car insurance without having to carry bare coverage.

Shopping around for another insurance provider is one avenue you can take when you are looking for a lower priced policy. You may be able to find an insurance company that offers you full coverage at a lower price, so it wouldn’t hurt to take the time to look for one.

Vehicle is Paid Off

Although additional coverage is often an option, there are times in which it is required. If you are leasing a vehicle or have financed your car, the lender will often require that you carry coverage to protect against damage to it.

In most cases, you will need to carry both collision and comprehensive coverage in order to protect the bank’s investment.

Once you have paid the vehicle off or if you are able to purchase a car outright, you may want to consider whether to continue to carry physical damage coverage.

This is especially true if you have an older car.

Once your vehicle has some years to it, the option to drop full coverage car insurance on it makes more sense. Number one, the repair costs for older cars are often lower than for new ones so even if you had to pay for them yourself it may be less than what you would have paid for insurance coverage.

Insurance companies pay for damages based on how much the car is worth.

For example, if your damages equal $3,000 and your car is only worth $2,000, only $2,000 would be covered and you would have to pay the difference. This is including your deductible as well, so in this case carrying full coverage would not be beneficial to you.

You can get a pretty good idea of what your car is worth by going to Kelley Blue Book. You enter the year, make, and model of your car, as well as any special features the vehicle may have and in what condition it is. You will then be given an estimate its market value.

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High Deductible

You need to consider your deductible amount when determining whether to continue carrying full coverage. Comparing your deductible for comprehensive and collision to the car’s value will give you a good indication what you should do.

Once the value of the car gets close to the deductible amount, carrying that extra coverage is unnecessary and is a waste of money.

You would be smarter to take the money you would save on your premium and putting it in the bank to have as a reserve in the event you do need to ever pay for repairs.

You can also consider lowering the amount of your deductible. This, however, will increase your insurance premium. You will need to weigh the price difference and determine what would be the smartest move financially.

Coverage Elsewhere

Although medical payment coverage is not usually that expensive compared to the other types of coverage, there may be times when not carrying it is a good move and will save you money.

Take a look at the health insurance that you carry. If it is a good policy with a low deductible and high limits, it may be sufficient to cover bodily injury damage from an accident.

If you dropped your medical coverage, you would not have coverage for passengers in your vehicle, however. This would not necessarily be an issue if the other driver were the cause of the accident, as their liability insurance would cover injuries.

If you did not carry this coverage and were the at-fault party then your passengers’ own health insurance or auto medical coverage would hopefully cover their injuries.

Some insurance providers consider full coverage to include roadside assistance coverage. This is another type of coverage that is not that pricey, but if you are covered for the same things through another association, such as AAA, it would make sense to drop this coverage from your auto policy.

There are a number of things to keep in mind when deciding whether to keep full coverage on your vehicle or to drop it from your policy. Drop it when it makes financial sense and your vehicle is of lower value; if you have a nicer vehicle, you may want to explore other ways to save money.

Explore car insurance rates right now by filling your ZIP code into the FREE comparison tool provided here!

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