The Great Auto Insurance debate! Let me start it by addressing one of my pet peeves as an agent. There is no such thing as “FULL COVERAGE”. Generally when people use the term full coverage, they are asking for either A) Comprehensive coverage and Collision coverage or B) Everything the company offers for auto insurance. However, let’s use this example:
You have these limits, as they are GENERALLY the highest an auto company offers:
$500,000 bodily injury per person
$1,000,000 per accident
$500,000 Property Damage
Then you and I have an accident and it’s your fault. Let’s just say you killed a family member in my vehicle. I decide to sue you for $1,000,000. Do you have “full coverage”? NO! You only have $500,000 per person! So, I am going to sue you personally for the other $500,000. The difference can be covered by an Umbrella, but that’s another post!
Ok, pet peeve cleared up! On to the real question.
As an insurance agent, I frequently hear the question “Should I take full coverage off of my car?” There are a lot of factors that go in to this decision and a lot of basic questions can make this decision much easier. I want to quickly explain the common coverage that people refer to when asking this question.
Comprehensive or Other Than Collision
This covers almost anything that happens to your vehicle that is not YOUR fault. A tree falls on it, broken glass, THEFT, and hail damage are all part of comprehensive coverage. It even covers damage from pets and animals- like squirrels chewing up the wiring on the underside of a truck.
Covers repairs to YOUR vehicle when you have an accident that is YOUR FAULT.
If you were my client this is what I would ask you if you wanted help deciding whether or not to remove those coverages:
1. Do you still have car payments and if so, does the lender require you to have the coverage?
If this is the case, then NO, you don’t want to remove the coverage!
2. Do you know the value of your car?
Kelly Blue Book will easily let you check the value of your car. This is important: If the value of your car is MORE than the cost of your premium and deductibles then keep the coverage! Insurance is supposed to return you to the state you were in before your property was damaged. If you remove those coverages and have an at fault accident, you’re going to lose money.
3. Do you have the money to replace your vehicle?
Some people don’t mind financing new vehicles, and that’s fine and your business. However, other people like to pay cash for replacement vehicles. If you pay cash, and you don’t have the cash on hand to replace your vehicle, then keep the coverage!
After reading this you might be thinking “Ok fine, but now how do I save money on insurance?” I wrote about this very topic months ago, but I do have another few tricks up my sleeve.
If your car is paid off, and you have a good track record of NOT being the cause of an accident, you can remove Collision coverage and keep Comprehensive with most companies. You would still be at a loss if you caused an accident, but aside from that your vehicle is covered for theft, squirrels, fires, flood, etc. Collision is the majority of the cost for your auto insurance. Using myself as an example, I have not caused a traffic accident since I was 18 years old. 18 years later, I would say I am a pretty darn good candidate to remove Collision coverage from my vehicle.
As always, check with your own agent regarding your laws in your state before making any changes, but I hope this helps you make a wise decision!
Did you ever regret removing comprehensive or collision coverage from your insurance policy? Tell me about it!