Advice on Dropping Comprehensive Car Insurance

By Dayna Noffke

  • Overview

    Comprehensive car insurance is designed to pay for losses that you incur through theft, vandalism or other events such as weather related damage. Loan companies require owners to carry comprehensive insurance on vehicles that are still being paid off. However, after a vehicle is paid for in full, the responsibility for deciding whether or not to carry comprehensive coverage is the owner's.
  • Definition

    Comprehensive car insurance covers your vehicle for losses you may incur, regardless of the cause. This can include damages that are a result of theft or vandalism, and natural events such as fire or storms. Comprehensive coverage is carried in addition to collision coverage, which is not included in the comprehensive package. Lenders require comprehensive coverage. This is a benefit to you, the borrower, because you will not be left paying for a vehicle that cannot be used if your car is damaged beyond repair. If you pay off the loan (or pay cash for a car), comprehensive insurance becomes optional.
  • Considerations

    The decision to drop comprehensive insurance coverage should be based upon a careful examination of the specific situation. If the cost of comprehensive insurance for one year would be more than the true value of the car, dropping it may be an acceptable risk. However, if something happens to your vehicle (for example, it is stolen and is not recovered), the loss will be entirely yours. Dropping comprehensive coverage makes sense only if you have the means to replace the car on your own.

  • Options

    If you decide to drop comprehensive coverage, keep in mind that state laws still require that you carry, at a minimum, liability insurance. The amount of liability coverage required varies from state to state. You can elect to carry only liability coverage (which would pay for damages to other parties if you are at fault in an accident) or to carry liability and collision. Collision coverage will pay for your car in the event it is damaged or destroyed in an accident. Without collision insurance, you will be solely responsible for the cost of repair or replacement of your vehicle.
  • Misconceptions

    Many people drop comprehensive coverage based on misconceptions about other types of coverage. Consumers often mistakenly believe that collision coverage will pay for the cost of their vehicle if it is stolen. This is not accurate. Collision coverage provides payment only for damage incurred in a vehicular accident. It is also important to realize that if you carry only the minimum liability coverage required by law, you can be held responsible for damages above that amount. For example, if the amount of your coverage is $15,000 and you cause $25,000 worth of damage, you are liable for the additional $10,000. It is important to carry the highest level of coverage you can comfortably afford.
  • Lowering Costs

    If you are considering dropping comprehensive auto coverage to save money, look at other ways of reducing your insurance costs first. Comparison shopping can save you hundreds of dollars. Be certain to ask if you are eligible for any discounts when you get a quote, as many companies offer lower rates for older drivers and accident-free discounts. Websites that compare insurance rates are a great place to start. You can also keep your comprehensive coverage and choose a higher deductible to lower your premium. Insurance companies generally offer additional discounts for customers who pay premiums on an annual basis rather than through monthly or quarterly payment plans.
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