As your vehicle ages, your auto insurance needs may change. Varying coverage options are available depending on the age and value of the vehicle. You should constantly keep track of the value and age of your vehicle so that you can adjust your auto insurance policy and coverage as needed.
New Vehicles and Auto Insurance Requirements
When it comes to auto insurance requirements, only minimum auto insurance liability is typically required by state law. Depending on where you live, requirements and limits for those requirements may vary.
Here are the minimum liability insurance requirements (per California Insurance Code §11580.1b):
- $15,000 for injury/death to one person.
- $30,000 for injury/death to more than one person.
- $5,000 for damage to property.
Liability insurance compensates a person other than the policy holder for personal injury or property damage.
Comprehensive or collision insurance does not meet vehicle financial responsibility requirements.
State law isn’t the only entity that may require you to have car insurance, however. If you purchase a new vehicle, the dealership may require you to carry full coverage on the vehicle as long as you have a loan. Until you pay off the vehicle, you may need to carry more than minimum liability for protection.
What is Full Coverage Car Insurance?
Full coverage under car insurance refers to the highest amount of insurance you can place on a single vehicle. All insurance policies must come with at least minimum liability as required by the state, but full coverage auto insurance often offers higher limits and larger ranges of coverage.
A full coverage auto insurance policy may include:
- Comprehensive Coverage: Comprehensive coverage provides compensation for damages to the vehicle caused by fire, wind, hail, lightning, smoke, theft, vandalism and other incidents not involving collision.
- Collision Coverage: Collision coverage provides compensation for damages to the insured vehicle caused by a collision with another vehicle or object.
- Liability: Liability insurance covers bodily injury and property damage you may cause someone else while operating the insured vehicle.
- Medical Payments Coverage: Medical payments coverage, available as personal injury protection (PIP) in some states, covers medical bills you and your passengers may face after an accident, no matter who is responsible for causing the accident.
- Uninsured/Underinsured Motorist: This insurance covers expenses related to an accident involving another driver who is not carrying insurance.
- Roadside Assistance: Roadside assistance helps with expenses related to trip interruptions, such as if you run out of gas, blow a tire or need to be towed.
Full coverage auto insurance is generally recommended, although it’s not required by state or federal laws. This is because full coverage provides the most protection for drivers, their vehicles and their passengers no matter how car accidents are calculated in the state (i.e.: how fault is considered).
When Should You Drop Full Coverage Car Insurance?
Sometimes, the cost to insure your vehicle with a full coverage policy is more than necessary for the value of the vehicle. Aside from classic cars, vehicles generally lose value as they grow older. If the cost of insuring your vehicle is more than the value of the vehicle itself, you may no longer want or need full coverage. This is especially true for older vehicles that have been paid off. If you no longer have a loan on your old vehicle, meaning that you are no longer required to carry full coverage, you may drop to minimum liability. Remember that even older vehicles and those that have been paid off must legally carry the liability requirements determined by the state.
Before adjusting your coverage or dropping insurance, however, be sure to calculate the value of your vehicle and speak with your insurance agent. It can be risky to lower your coverage even if your vehicle is older and paid off. Lowering your coverage amount means paying more out of pocket in case of damage to your vehicle or an accident. If you drop comprehensive coverage and your vehicle is severely damaged by a hailstorm, for example, you will be responsible for repairing the vehicle completely.
This is why it is recommended that you only drop full coverage once the value of your vehicle is less than the cost of insuring it. In other words, if it would be more cost effective to replace the vehicle than to repair it, you may not want to bother with a full coverage auto insurance policy. This generally only applies to older vehicles.
What Qualifies as an Older Vehicle?
The term “older vehicle” may vary, but it generally refers to vehicles that are ten years of age or older. You should also consider the decreasing value of the vehicle, make and value of certain parts that could be expensive or difficult to replace after an accident. If parts of your vehicle are no longer made or available, you may have difficulty with insurance and want to reconsider your policy.