When To Drop Full Coverage
According to Money magazine, once your car is worth less than 10 times what you pay each year to insure it, you should drop comprehensive and collision coverage. At this point, even if you have full coverage, your insurance may not be willing to pay for repairs if the car is worth less than the cost of repairing it. They might, instead, consider it “totaled” and give you only what they determine its retail value to be.
You are also able to drop full coverage once you have a clear title on the vehicle. Any liens on the vehicle typically include a provision requiring full coverage auto insurance until it is paid off. However, just because you can drop full coverage doesn’t always mean you should.
You have to find a nice balance between risk tolerance and affordability. If you decide to drop full coverage, you risk not being able to afford to make needed repairs in case of an accident. If you decide to keep full coverage, you may be wasting money paying for more coverage than your vehicle really needs.
All in all, if you can’t afford to replace your car with cash, it may be best to keep full coverage for now.