How to tell whether collision and comprehensive are still worth paying for, with the 10% rule and the questions to ask first.
“Full coverage” is shorthand for collision and comprehensive on top of the liability insurance the law requires. Collision pays to repair your car after an accident; comprehensive covers theft, fire, hail, flooding and hitting an animal.
Both pay only up to the car’s actual cash value, minus your deductible. As the car ages, that maximum payout shrinks.
A common rule of thumb: when collision and comprehensive cost more than about 10% of the car’s value each year, consider dropping them.
A car worth $6,000 with a $1,000 deductible can pay out at most $5,000. If the two coverages cost $900 a year, that is 15% of the car’s value — and about five and a half years of premiums equal the most you could ever collect.
Is the car financed or leased? The lender almost certainly requires the coverage.
Could you replace or repair the car from savings without hardship? If not, the coverage may still be worth it.
Would dropping only collision be enough? Comprehensive is often much cheaper and covers theft and weather.
Dropping collision and comprehensive does not change what you owe others if you cause an accident. Many people use part of the savings to raise their liability limits.