Buying Full Coverage Insurance: When You Shouldn't

Buying full coverage car insurance is a requirement when your car has an outstanding loan balance. There are many people who believe there are two types of car insurance: Liability and full coverage insurance options. It is difficult to determine which insurance policy is right and important to know the differences between them.

Full Coverage Car Insurance

Full coverage car insurance does not cover things like broken glass, damage to the car when it’s not moving and liability insurance if someone is hurt. You will require a separate policy for any of those damages. Also, there is a separate coverage policy for flood damage. There are a number of important reasons that you will need full coverage insurance. Among the most common reasons are:

  • The car is financed and the bank requires it
  • It’s a late model car and the replacement cost is out of your budget

Liability Insurance

Liability insurance is the minimum coverage required by states, before they allow you to drive your car on the road. However, that does not necessarily mean that you have enough coverage. Liability coverage will cover bodily injury, property damage for the personal belonging of others and bodily injury to passengers.

When You Don’t Need Full Coverage

If you are driving an older car, and you own it outright, then you may want to reconsider the use of full coverage auto insurance. The top reason that you should consider getting the minimum coverage is because of the value of your car.  After a certain cost, it costs much more to maintain the full coverage on an old car. 

For example, if your car is 10 years old and only gets driven 1000 miles a year, the insurance company takes into account the value of the car based on the current “blue book” value and nothing else.

You can contact an agent and get an idea of what the replacement value would be if you were involved in an accident, and then compare what the adjuster would give you compared to what the annual premiums are to carry the insurance. In most cases, if you car is 8 years old or more, a full coverage policy will cost much more than it is worth.

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