There are many factors that determine which auto insurance coverage is best for each individual situation. A question that comes up often for insurance agents is the debate regarding full coverage auto insurance and whether or not it’s worth the cost of adding. First let’s discuss what “full coverage” insurance consist of:
This coverage refers to bodily and property damage that you would be considered at fault for. This coverage is required in every state. See what your state minimums are here.
This coverage is optional and pays out no matter who’s at fault. Collision coverage would only apply to your vehicle/s and would require your deductible to be paid before the insurance company covers the remainder. So if you’re at fault for an accident, to repair your vehicle, you would utilize the collision coverage.
In the event that you experience loss or damage to your vehicle that does not involve an accident with another auto, comprehensive insurance would come into factor. This coverage is optional and common uses would be windshield replacement, fire, hail, theft, etc..
Now that we know the three elements that make up full coverage insurance, there are certain factors that determine whether or not adding full coverage is needed.
First, if you carry a loan on a vehicle, you are required to carry full coverage insurance. This protects the lender in the event that the vehicle is totaled or incurs a loss. The lender would need to be placed as lien holder on the auto insurance declarations and receive copies of your policy and renewals.
If you’re lucky enough to have a paid off vehicle, the Blue Book value is usually the main factor in determining whether or not to add full coverage. Many insurance agents recommend not carrying full coverage for vehicles worth several thousand dollars or less. There’s not a certain price point that works best for all situations so you have to carefully consider the cost of the Collision/Comprehensive coverage per year as apposed to the Blue Book value.
Also, someone with more liquid assets may be able to sustain a loss greater than someone without and thus be able to carry liability only on higher Blue Book valued vehicles. Each situation is unique so you have to factor in your ability to easily replace a vehicle with liquid assets and/or the ability to qualify for a new auto loan.
Since your insurance portfolio is unique, we recommend consulting with an insurance professional if you have further questions.