When is Full Coverage Insurance Not Worth It?

Your car is old or has many kilometers? A good rule of thumb is that when your annual payment for full coverage equals 10% of the value of your car, it's time to consider canceling the coverage. Some older cars are still fair value and if you have a classic or rare vehicle that has maintained its value even after several years of ownership, you must weigh the cost of maintaining full coverage. Full-coverage car insurance is financial protection in the event that your car is damaged or stolen. However, if the value of your car is low enough, it may not make sense to take out full coverage insurance.

If the actual cash value of the vehicle is less than 10 full coverage payments, drivers must cancel full coverage. Keep in mind that if you cancel your collision or comprehensive insurance, you won't be covered for certain types of problems. Full coverage insurance is a general term used to describe an auto insurance policy that includes liability, collision, and comprehensive coverage. This means that you have coverage that protects you and your property, in addition to the damage you may cause to another person or your property in an accident where you are at fault. That's because your maximum payment, which is the value of the car minus the amount of the deductible, is likely to be extremely low and, over time, not worth the cost of insurance. Drivers who want to protect themselves in the event of an accident involving an uninsured driver can choose to maintain their coverage against uninsured drivers and, at the same time, cancel their comprehensive and collision coverage.

For example, if you choose full coverage with minimum levels of liability insurance, you will continue to be responsible for any damage that exceeds the limits of your coverage. New or used, any car you finance is likely to have a clause in the terms of your loan that requires you to have full coverage insurance. Losing collision coverage or comprehensive coverage could expose you to problems such as car accidents, car thefts, acts of vandalism, floods and fires. Here's what you need to know about what's normally included in full-coverage car insurance and when you can get rid of these policies. You can also consider canceling full coverage if your all-risk and collision premiums are equivalent to 10% or more of the actual cash value of your car. While insurers generally sell them together and drivers of older cars tend to leave them at the same time, Poe and Worters say comprehensive insurance is better value for money than collision coverage.

This largely depends on your financial situation. If you can't afford to replace your car in the event of a total loss, it's probably worth keeping your full-coverage insurance. Most drivers need the financial protection that comes with comprehensive and collision coverage.

Carl Somilleda
Carl Somilleda

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