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Full Coverage on an Old Car

Written by Michele Wilmonen. Posted in Research Last Updated: 03/21/2011

What is the definition of “full coverage”, should you drop it on an old car and what old cars should you drop it from.

An Old Car Past its Prime

It would be a good idea NOT to carry full coverage on this hunk of metal.

Sometimes there are investments that you make that are just not financially sound and having full coverage on an old car may be one of them.  Cars start losing their value as soon as you drive them off of the lot and the value just continues to decline from there.

There is a point in a car’s life that the cost to repair any damages that may happen to it actually exceeds the worth of the vehicle itself and when a car gets that old it may be time to stop paying for full insurance coverage.

What do you Mean “Full Coverage”?

When you hear people in the insurance industry talking about “full coverage” what they are talking about is the combination of your liability coverage and the property damage coverage for your own vehicle (comprehensive and collision).  So when some someone tells you that it may be not worth having full coverage on your old vehicle, they mean that it may not be worth having the Comprehensive and Collision coverage.  They are not telling you to cancel your whole insurance policy as you still need your Liability insurance no matter how old your vehicle may be.

Why Should I Drop Full Coverage?

When a vehicle is in a car accident the insurance company will compare the value of the vehicle to the amount of money it will cost to repair the damages to the vehicle.  If the cost of the damages exceeds a certain percentage of the value of the vehicle the insurance company will deem the vehicle a total loss and will pay you for the value of the vehicle. No matter how much you pay in insurance premiums for your vehicle the insurance company will never pay out more than the value of your vehicle (don’t forget they also subtract your deductible from this amount).

So if the value of your old vehicle is not very much, you need to sit down and compare how much you are paying in insurance premiums to keep Comprehensive and Collision coverage on you vehicle, to how much your vehicle is worth.

If the premiums exceed the value of your vehicle it may be a better financial decision for you to drop the full coverage and put what you would be paying for that premium in a savings account.  Then if you are ever in an accident you will have cash set aside to pay for the damages to your vehicle or for a down payment on a new car if your old vehicle is totaled.

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By putting what you would be paying in premiums into a savings account, you are not only saving more money by keeping it instead of paying an insurance company more in premiums than what they are going to pay out for your vehicle, you will also be earning interest on this money.

Should Full Coverage be Dropped on All Old Vehicles?

Short answer: no. Full coverage should not be dropped on all old vehicles.  The age of the vehicle should not be the reason that you drop full coverage on a vehicle, but the value of the vehicle should be.   The reason that people refer to old cars not needing full coverage is that as the older a vehicle gets the less that it is worth.

The exception to this is classic cars.  Classic cars are vehicles that are so old that people start collecting them and restoring them back to the point that the vehicles value is increased.  These types of cars need to have full coverage on them to protect the money that has been invested in their restoration.

What Happens if I Drop Full Coverage on my Old Car?

If you drop full coverage on your vehicle your insurance company will not pay for any damages that you may have to your vehicle in the case of an accident.  This also includes damages caused by hitting an deer or any damages to your windshield as you will also no longer have Comprehensive coverage.

This means that you will have to pay for the damages out of your pocket and if you didn’t put aside the money that you had saved from dropping the full coverage on your vehicle, you may have to drive around a damaged vehicle or be completely without a vehicle if the car was totaled.

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Michele Wilmonen

Michele's first introduction to insurance was working for a major insurance company as a file clerk and a mailroom supervisor in a regional office. She learned insurance directly from underwriters and claims adjusters from questions and also watching them do their job. Since then, she's earned a number of insurance certifications from the Insurance Institute of America and also a Bachelor’s degree from the University of Idaho. She blogs at Car Insurance Guidebook.

Reviews (3)

  • Todd Clay

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    That depends on your means to repay it. If you have enough cash to buy a replacement car and you don’t mind using cash for a replacement car, it might be a good idea to drop coverage. But if you’re worried about having to replace your car when you have an accident, then the coverage is probably worth the $850/yr.

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  • Barbara Conlee

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    Is a 2005 KIA Optima in very good condition with 25K mi. worth full coverage of $850/yr? Thanks
    I sent an email earlier with $850 a month by mistake, sorry

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  • Barbara Conlee

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    Is a 2005 KIA Optima in very good condition with 25K mi. worth full coverage of $850/mo? Thanks

    Reply

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