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rental car damage and liability insurance

Full coverage auto insurance provides drivers with extensive protection for their vehicle. It typically includes both collision and comprehensive coverage in addition to state minimum liability policies:

  • Collision insurance covers damage to your vehicle after an accident with another car or object.

  • Comprehensive coverage pays for damage from non-collision events like weather, vandalism, or theft.

Some full coverage policies also include uninsured/underinsured motorist coverage and medical payments coverage depending on state regulations and individual needs. Full coverage is generally required if you have a leased or financed vehicle.

Dropping full coverage is an important decision you should not take it so lightly

Reasons to keep full coverage

There are several situations where it makes good financial sense to maintain full coverage insurance on your vehicle even if it is getting older.

Leased or financed vehicle

If you have an outstanding auto loan or are leasing your car, full coverage is usually mandatory. Your lender wants to protect their investment in case the vehicle is totaled or stolen. Dropping comprehensive or collision would violate your financing terms.

New vehicle

Brand new cars depreciate quickly, but still carry significant value for the first 5-10 years. Having full coverage protects against taking a major financial hit if your newish vehicle sustains damage. The peace of mind is worth the premiums.


  • Payoff for total loss accident often exceeds remaining loan balance
  • Coverage for expensive repairs during warranty period

High value classic/rare vehicle

For collectors cars or vintage vehicles that have maintained value due to demand, full coverage can be a good idea even after many years or high mileage.

Factors to consider:

  • Has the car appreciated or retained value?
  • What is the estimated repair cost for common issues?
  • Is it difficult to find replacement parts?


  • Classic muscle cars
  • Vintage trucks/SUVs
  • Limited edition models

Even if repairs are costly for a rare or specialty vehicle, the potential insurance payout from full coverage may be worth it. Speak to your agent about getting an agreed value policy.

When to Think Twice

However, there are some exceptions where full coverage on an older vehicle may not make sense:

  • You can easily afford to replace the vehicle if damaged
  • The car has very low actual cash value due to age and wear
  • The vehicle is only driven occasionally or has extremely high mileage

Discuss your particular circumstances with your insurance provider to determine if full coverage is right for you. Be sure to shop around for the best rates.

Reasons to keep full coverage

There are several situations where it makes good financial sense to maintain full coverage insurance on your vehicle even as it ages:

Leased or financed vehicle

If you have an outstanding loan or lease on your car, dropping full coverage is usually not an option. Lenders and leasing companies require you to carry both collision and comprehensive coverage to protect their investment in your vehicle. If you total your car, the payout from these policies pays the lien holder rather than you.

New vehicle

Brand new and relatively new vehicles deserve full auto insurance protection. Even if you own your car outright, a total loss soon after purchase would leave you with no vehicle and no money to replace it.

Collision and comprehensive coverage prevent the need to pay thousands out of pocket for major repairs or replacement. As your car depreciates over the first 5-10 years, gradual lowering of coverage limits can reduce premiums while still providing adequate protection.

High value classic/rare vehicle

Owners of classic, rare, or other high-value older vehicles should consider keeping full coverage policies. Even though these vehicles are older, their agreed value based on condition, parts, and collectibility is often much higher than a standard car.

Comprehensive coverage helps pay for damage repairs and replacements for hard-to-find parts. Optional agreed value coverage means the insurer pays the set agreed amount in case of total loss, rather than low standard actual cash value.

For all of these situations, the extra peace of mind provided by full coverage insurance may be worth the additional premium cost. Make sure to discuss specific coverage needs for specialty vehicles with your insurance agent.

Other scenarios

  • Recent expensive repairs or upgrades
  • Vehicle with expensive replacement parts
  • Frequent long distance driving
  • Areas prone to weather damage
  • Limited household budget
  • Multiple claims in a short time period

While these factors don't necessarily make full coverage an absolute must, they can tip the scales in favor of more protection in specific cases.

Carefully weighing the pros and cons of reducing insurance allows you to feel confident in your choice. Don't hesitate to re-evaluate your needs any time significant life circumstances change.

Assessing current vehicle value

Determining the current value of your vehicle is crucial when deciding whether to drop full coverage. The potential payout if your car is totaled sets the upper limit of what comprehensive and collision insurance will provide. If the vehicle's value is very low, you may end up paying more in premiums over time than you would receive from a claim.


All vehicles lose value over time through the process of depreciation. New cars can lose 10-30% of value in the first year alone. Depreciation slows in subsequent years but continues to reduce resale value. Higher mileage speeds up depreciation.

Factors impacting depreciation:

  • Age of vehicle
  • Mileage
  • Make/model reputation
  • Initial purchase price
  • Ongoing maintenance and repairs
  • Accident history

Actual cash value

If you file a claim after a total loss accident, the insurer will pay the actual cash value (ACV) of your vehicle. This is the current fair market value - what your car would sell for right now to a private party.

ACV is affected by:

  • Local demand for make/model
  • Vehicle condition
  • Options and upgrades

ACV tends to be lower than retail value estimates and is often closer to trade-in value. Your insurer will research recent sales of comparable vehicles in your area to determine ACV.

Strategies to estimate ACV:

  • Research trade-in prices
  • Check resale listings in your area
  • Get quotes from multiple dealers
  • Review value guide listings for your car's specifics

Having a realistic idea of what your car is worth allows you to make an informed decision about appropriate coverage levels.

Evaluating potential insurance payout

When deciding whether to keep full coverage on an aging vehicle, also consider how much money you would actually receive if you filed a comprehensive or collision claim. The potential payout is limited by your deductible and the actual cash value of your car.

High deductible

Both collision and comprehensive insurance involve a deductible - the amount you pay out-of-pocket before coverage kicks in. A higher deductible reduces your premiums but increases your financial responsibility in the event of a claim.

Common deductible amounts:

  • $250
  • $500
  • $1,000
  • $2,000+

With a $1,000 deductible, for example, you would receive $3,500 from your insurer if your car worth $4,500 was totaled. Make sure to account for the deductible when evaluating if coverage is cost-effective.

Total loss

A vehicle is considered a total loss when the repair cost exceeds the actual cash value. This typically happens when:

  • Damage is extensive (e.g. frame/structural)
  • Airbags have deployed
  • Repair cost is 70-100% of ACV

For older, lower value cars, severe damage from even a minor accident can lead to the vehicle being totaled.

In this situation, the insurance company pays the ACV minus deductible and salvages the vehicle. You cannot pocket the payment and keep driving the damaged car.

Key considerations:

  • Can you afford to replace the vehicle if totaled?
  • Is the ACV payout enough for a comparable model?
  • Do you have savings for a down payment on a different car?

Evaluating your finances along with potential payouts helps determine if dropping to liability-only makes sense. Discuss scenarios with your agent.

Transitioning to minimum coverage

Once you decide full coverage no longer makes financial sense for your aging vehicle, you can transition to a minimum coverage policy, also known as liability-only coverage.

Liability-only coverage

Minimum liability coverage policies only pay for damage you cause to others in an at-fault accident. They do not cover repairs to your own vehicle under any circumstances.

Required minimum liability coverage varies by state but commonly includes:

  • Bodily injury liability
  • Property damage liability

Optional add-ons:

  • Uninsured/Underinsured motorist bodily injury
  • Medpay
  • Personal injury protection (PIP)

Benefits of minimum coverage:

  • Significant premium savings vs. full coverage
  • Meets state legal requirements
  • Covers damage to others if you are at fault

Lower premiums

Dropping comprehensive and collision coverage reduces your auto insurance premiums, often substantially.

For example, a full coverage policy for a 10-year old sedan may cost $1,500 per year. Going to minimum coverage could potentially lower premiums to around $500 annually, saving $1,000.

Actual savings depend on:

  • Make and model of vehicle
  • Driver's age
  • Location
  • Driving record
  • Selected coverage limits

Shop around to find the best rate for minimum coverage from reputable insurers. Compare quotes every 1-2 years as new discount opportunities arise.

Drawbacks of minimum coverage

  • No protection for your vehicle from damage
  • Out-of-pocket costs for all repairs
  • Need to pay for rental car if yours is undrivable
  • Potential lawsuits if underinsured

Weigh the trade-offs carefully as you transition policies. Re-evaluate as your situation changes.

Dropping comprehensive or collision

Rather than eliminating full coverage entirely, some drivers opt to drop just comprehensive or just collision. This middle ground approach provides some protection while reducing premium costs.

Low mileage

Drivers who put very few miles on their vehicle each year have lower risk of an accident. For cars driven 5,000 miles or less annually, dropping collision coverage can make sense.

You still have liability and comprehensive in case of:

  • Theft
  • Vandalism
  • Weather damage
  • Fire

Collision claims become less likely with minimal driving. Evaluate your driving habits and needs.

Affordability to replace vehicle

If you can comfortably afford to pay cash for a comparable replacement vehicle if yours is totaled, collision insurance provides less value.

Have a savings fund designated for your next car purchase. Be sure to account for:

  • Any remaining loan balance
  • Applicable sales taxes
  • Registration and title fees
  • Initial insurance premium

Dropping collision transfers the financial risk to you but can yield significant premium savings over time.

Comprehensive coverage considerations

Comprehensive claims are less dependent on driving habits. Carefully consider if you can shoulder the out-of-pocket costs associated with:

  • Windshield replacement
  • Hail/storm damage
  • Falling tree limbs
  • Fire
  • Theft

Your parking accommodations also impact comprehensive coverage needs. An enclosed garage reduces risk substantially.

Strategies to reduce premiums

Rather than eliminating a coverage completely, you can also opt for higher deductibles or lower coverage limits to reduce premium costs while retaining some protection. Discuss options with your insurance agent.

When to drop full coverage

Deciding exactly when to eliminate full coverage auto insurance depends on your specific circumstances. However, there are some general guidelines to consider as your vehicle ages and depreciates.

High mileage

Once your car reaches very high mileage, full coverage becomes less practical and more expensive compared to actual value.

  • Over 100,000 miles
  • Approaching 200,000 miles

Extremely high mileage vehicles are more prone to major mechanical issues. Repair costs can quickly outweigh actual cash value, leading to the car being totaled even with relatively minor collision damage.

Vehicle worth less than premiums

A general rule of thumb is to consider dropping full coverage when the annual premium exceeds 10% of your car's actual cash value.

For example:

Car Value Annual Premium Percentage
$5,000 $500 10%
$3,000 $400 13%
$1,500 $300 20%

As the premium percentage creeps up, you pay more and more each year for diminishing return. Liability may become the better option.

Other scenarios:

  • Loan paid off
  • Teenager's first car
  • Reduced driving needs
  • Cost cutting required
  • Budgeting for new car

Look at the whole financial picture. Make sure you can cover repairs or replacement if you drop full coverage.

Gradual steps

Consider incremental changes over a few years as your car depreciates:

  • Increase deductibles
  • Lower collision limits
  • Drop comprehensive

This eases the transition to liability-only when the time comes. Check with your agent on impact to premiums.

Keeping peace of mind

The decision to reduce auto insurance coverage involves more than just financial calculations. Peace of mind and risk tolerance are also important factors.

Risk tolerance

How comfortable are you taking on the added risk that comes with lower coverage limits? Consider your ability to cover the costs associated with:

  • Major collision repairs
  • Replacing a totaled vehicle
  • Paying medical bills after an at-fault accident

Could your finances withstand the financial impact of these scenarios? Or would the burden be too great? Be realistic about your risk appetite.

Budget considerations

Look at the cost of maintaining full coverage in the context of your overall household budget and expenses.

Potential questions to ask:

  • Is the premium payment affordable each month?
  • Does it force trade-offs in other spending categories?
  • Are there ways to cut costs in other areas instead?
  • Could you allocate savings to an emergency fund instead?

A premium that is easily manageable for one family may be untenable for another. Evaluate what works for your unique situation.

Scenario planning

Imagine different claim scenarios and how you would handle the various out-of-pocket costs with lower coverage levels. This mental exercise can provide more clarity.

  • If your car was totaled, do you have savings to replace it?
  • Could you get a short-term loan if needed?
  • How would you get to work if your car needed major repairs?

Having contingency plans boosts confidence in your decision. Discuss "what if" scenarios with family members too.

Review frequently

Re-evaluate your coverage needs any time your finances or risk factors change. Significant life events like marriage, new home, kids, divorce, or job loss may shift your perspective on appropriate coverage. Don't lock yourself into a long-term decision. Review annually at minimum.

Special considerations

Certain situations require additional factors beyond simply vehicle age and value when deciding on full coverage.

Loan requirements

If you still owe money on an auto loan, your lender will stipulate minimum insurance requirements that you must meet. These commonly include:

  • Collision coverage
  • Comprehensive coverage
  • Maximum deductibles

Dropping to liability-only while still financing your car can trigger penalties, default, or account closure. You must continue full coverage until the loan is paid off.

State insurance minimums

Liability coverage minimums vary significantly by state. In Florida, for example, drivers must carry:

  • $10,000 bodily injury per person
  • $20,000 bodily injury per accident
  • $10,000 property damage liability

Meanwhile, Alaska requires:

  • $50,000 bodily injury per person
  • $100,000 bodily injury per accident
  • $25,000 property damage

Check your state's minimums before reducing insurance. Also look into uninsured and underinsured motorist coverage.

Teenage drivers

Adding a new teen driver to your policy will drive up premiums significantly. It may be better to put them as the primary driver of an older vehicle with minimum coverage. If your teen causes an accident, repairs come out of your pocket rather than through a claim.

High theft risk

Comprehensive claims account for almost 30% of losses on older vehicles according to the National Insurance Crime Bureau. If you street park in an urban area, dropping comprehensive may not be advisable. Location impacts your risk.

Assess how these specific factors may influence full coverage decisions for your situation. An independent agent can provide guidance on specialized cases.


Deciding when to reduce or eliminate full coverage auto insurance is a complex decision involving many variables. Consider your vehicle's current value and mileage, claims history, overall budget, ability to pay for repairs/replacement, insurance premium costs, risk tolerance, loan requirements, and state laws.

Weigh all these factors carefully before dropping or altering coverages. The right insurance levels provide financial protection while avoiding money wasted on unnecessary premium costs.

Discuss your specific situation with an insurance professional to determine the best options. Re-evaluate needs whenever circumstances change. With smart planning, you can feel confident you have the right level of coverage.

Other readers were also interested in the following posts:

Is Collision Covered in Comprehensive Insurance? Understanding Your Auto Insurance Options

What is Fully Comprehensive Car Insurance?

What is another term for comprehensive coverage?  

Does comprehensive cover own damage?

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