What "Full Coverage" Actually Means
"Full coverage" is shorthand for three types of coverage:
1. Liability coverage (required by law) • Bodily injury liability: Pays others' medical bills when you're at fault • Property damage liability: Pays for others' vehicles and property you damage • Never drop this: Legally required and protects your financial future
2. Collision coverage (optional on older cars) • Pays to repair/replace your car after accidents (regardless of fault) • This is what becomes questionable on old cars • Typically the most expensive coverage component
3. Comprehensive coverage (optional on older cars) • Pays for theft, vandalism, weather damage, fire, animal strikes • Often cheap ($150-250/year) even on older cars • Sometimes worth keeping even when dropping collision
The critical distinction: When evaluating "full coverage" on an old car, you're really asking: "Should I keep paying for collision and comprehensive?" Liability is non-negotiable—you must have it by law, and you should carry adequate limits regardless of your car's age.
The 10% Rule: When to Drop Full Coverage
The 10% Rule: If your annual collision + comprehensive premium exceeds 10% of your car's actual cash value, dropping coverage often makes financial sense.
How to apply the 10% rule:
Step 1: Determine your car's actual cash value • Use Kelley Blue Book, Edmunds, or NADA Guides • Be realistic about condition (most cars are "fair," not "excellent") • Account for mileage, wear, and local market
Step 2: Find your annual collision + comprehensive premium • Check your policy declarations page • Add collision and comprehensive premiums together • Exclude liability, uninsured motorist, and other coverages
Step 3: Calculate the percentage • (Annual collision + comprehensive premium) ÷ Car value × 100 = X% • If X > 10%, strongly consider dropping coverage
Example calculations:
Scenario 1: Drop coverage • Car value: $3,500 • Collision premium: $400/year • Comprehensive premium: $180/year • Total: $580/year • Percentage: $580 ÷ $3,500 = 16.6% • Verdict: Not worth it—you're paying 16.6% of the car's value annually. Over 6 years, you'd pay more in premiums than the car is worth.
Scenario 2: Keep coverage • Car value: $12,000 • Collision premium: $450/year • Comprehensive premium: $200/year • Total: $650/year • Percentage: $650 ÷ $12,000 = 5.4% • Verdict: Worth keeping—reasonable cost for protection on a moderate-value vehicle.
Scenario 3: Borderline decision • Car value: $5,000 • Collision premium: $350/year • Comprehensive premium: $150/year • Total: $500/year • Percentage: $500 ÷ $5,000 = 10% • Verdict: Right at the threshold. Consider other factors (your savings, risk tolerance, car necessity).
Why the 10% rule works: • Most drivers keep cars 6-10 years • At 10% annually, you'll pay 60-100% of car's value over its remaining life • Add deductibles ($500-1,000), and you're often paying more than you'd ever receive • Insurance is about protecting against catastrophic loss—not minor/moderate expenses you could handle
When Full Coverage Is Still Worth It on an Old Car
Keep full coverage (or at least collision/comprehensive) when:
1. You can't afford to replace the car • If losing your $6,000 car would be financially devastating, keep coverage • Emergency savings are inadequate • The car is essential for work/life and you have no backup transportation • Peace of mind value exceeds mathematical calculation
2. You still owe money on the car • Lenders require collision and comprehensive until loan is paid off • This is non-negotiable—no choice here • Once paid off, reassess using the 10% rule
3. Your car retains good value despite age • Well-maintained older vehicles from reliable brands (Toyota, Honda) • Classic or collectible vehicles • Trucks and SUVs that hold value well • Example: A 10-year-old Toyota Tacoma might still be worth $18,000
4. You live in high-risk areas • High theft rates: Keep comprehensive (often only $150-250/year) • Severe weather: Hail, floods, hurricanes make comprehensive valuable • High accident rates: May justify keeping collision • Deer/animal strikes common: Comprehensive covers this
5. Comprehensive is very cheap • Comprehensive alone often costs $100-200/year on older cars • Protects against total-loss events (theft, fire, flood) • Consider keeping comprehensive even when dropping collision • Smart strategy: Drop expensive collision, keep cheap comprehensive
6. Your deductible is low relative to car value • If you have a $250 deductible on a $6,000 car, potential payout is $5,750 • More worthwhile than $1,000 deductible with potential $5,000 payout • However, consider raising your deductible instead of dropping coverage entirely
When to Definitely Drop Full Coverage
Drop collision and comprehensive when:
1. Car value is very low (under $3,000) • After a $500-1,000 deductible, maximum payout is $2,000-2,500 • Not worth paying $400-600/year for this protection • You're better off saving the premium in an emergency fund
2. The 10% rule is clearly exceeded (15%+ of car value) • You're paying too much relative to potential benefit • Self-insurance makes more financial sense • Save premiums and use for repairs or replacement
3. You have sufficient emergency savings • Emergency fund covers 3-6 months expenses PLUS car replacement • You could buy a replacement car tomorrow without financial stress • You're essentially self-insuring, which is fine when you can afford it
4. The car is a second/spare vehicle • You have another car you can drive • Losing this car wouldn't impact your daily life significantly • The car isn't used for commuting or essential transportation
5. Collision is expensive but comprehensive is cheap • Compromise strategy: Drop collision (usually $300-500/year), keep comprehensive (usually $150-200/year) • You're still protected against theft, weather, and vandalism • You self-insure for accident damage (which you have some control over)
6. You're a safe driver in a low-risk area • Clean driving record with no accidents in 10+ years • Short commute or low annual mileage • Low-crime, low-traffic area • Lower risk = less value from collision coverage
The Smart Strategy: Adjust Coverage, Don't Just Drop It
Instead of all-or-nothing, consider these nuanced approaches:
Strategy 1: Drop collision, keep comprehensive • Saves: 60-75% of "full coverage" premium • Keeps: Protection against theft, weather, vandalism, animal strikes • Best for: Cars worth $3,000-6,000 in areas with theft or weather risk
Strategy 2: Raise deductibles significantly • Increase from $500 to $1,000 or even $2,000 • Saves: 30-50% on collision/comprehensive premiums • Keeps: Protection against total loss events • Best for: Cars worth $5,000-10,000 when you have good emergency savings
Strategy 3: Reallocate savings to higher liability • Drop collision/comprehensive (save $500-700/year) • Increase liability from state minimum to 100/300/100 (costs $200-300/year) • Net savings: $200-500/year • Benefit: Better coverage where it matters (protecting your assets, not your old car) • Best for: Anyone with assets to protect
Strategy 4: Time-based decision • Keep full coverage for first 5-7 years • Drop collision at 8-10 years or when car value drops below $5,000 • Keep comprehensive indefinitely (cheap and valuable) • Best for: Systematic approach that aligns with typical depreciation
Example of smart reallocation:
Current situation: • 2012 Honda Civic worth $5,000 • Coverage: 25/50/25 liability + $500 deductible collision/comprehensive • Annual premium: $1,200 ($400 liability, $450 collision, $200 comprehensive, $150 other)
Smart adjustment: • Drop: Collision (save $450) • Keep: Comprehensive ($200) • Increase: Liability to 100/300/100 (add $200) • Add: Uninsured motorist coverage (add $100) • New annual premium: $1,050
Result: • Save $150/year • Better liability protection (protects assets and income) • Still covered for theft/weather • Self-insure for collision (controllable risk on low-value car)
Over 5 years: • Save $750 in premiums • Avoid personal liability in serious accident (priceless) • Protected from uninsured drivers
What About Liability Coverage on an Old Car?
Critical point: Never drop or reduce liability coverage on an old car.
Your car's age has ZERO impact on liability needs
Liability coverage protects: • Your assets: Home equity, savings, investments • Your income: Future wages from garnishment • Your financial future: From lawsuits and judgments
These risks don't decrease because you drive an old car. A 2010 Honda Civic can cause the same $250,000 accident as a 2024 BMW.
In fact, you should INCREASE liability as your car ages
Why? Because as you age: • Home equity grows as you pay down mortgage • Retirement accounts accumulate • Career income increases • Savings grow • You have MORE to protect, not less
Recommended liability coverage regardless of car age: • Minimum: 100/300/100 (for most drivers) • Better: 250/500/100 (for homeowners and higher earners) • Best: 500/500/100 + $1-2M umbrella policy (for high net worth)
Example: • Driver: Age 45, owns home with $150,000 equity, has $200,000 in retirement savings • Car: 2013 Toyota Camry worth $6,000 • Wrong approach: Drop to liability-only with state minimum (25/50/25) because car is old • Right approach: Drop collision, keep comprehensive, increase liability to 250/500/100
The driver's $350,000 in assets requires robust liability protection regardless of driving a 13-year-old car.
How to Decide: Your Action Plan
Step 1: Look up your car's value (2 minutes) • KellyBlueBook.com, Edmunds.com, or NADAguides.com • Use your car's actual condition
Step 2: Find your current premiums (2 minutes) • Check your policy declarations page • Note collision and comprehensive premiums separately
Step 3: Apply the 10% rule (1 minute) • (Collision + comprehensive) ÷ Car value = X% • If X > 10%, dropping coverage likely makes sense • If X < 7%, keeping coverage likely makes sense • If X = 7-10%, consider other factors
Step 4: Assess your financial situation (5 minutes) • Emergency fund: Could you replace this car tomorrow? • Income stability: Secure job/income? • Other vehicles: Do you have backup transportation? • Risk tolerance: How would losing the car affect you emotionally/financially?
Step 5: Evaluate risk factors (3 minutes) • Theft risk in your area (check local crime statistics) • Weather risk (hail, floods, hurricanes common?) • Driving risk (long commute in heavy traffic?)
Step 6: Get quotes with different scenarios (10 minutes) • Quote 1: Current coverage • Quote 2: Drop collision, keep comprehensive + increase liability • Quote 3: Drop both collision and comprehensive + increase liability • Quote 4: Keep all but raise deductibles to $1,000-2,000
Step 7: Make informed decision • Compare costs and protection levels • Choose the option that balances cost and risk for YOUR situation • There's no universal "right" answer—it depends on your specifics
Step 8: Review annually • Your car depreciates every year • Reassess coverage each policy renewal • Adjust as car value changes
Frequently Asked Questions
Full coverage is usually not worth it when your car is worth less than $3,000-5,000 or when annual collision and comprehensive premiums exceed 10% of your car's value. However, you should never drop liability coverage—in fact, increase liability protection as you accumulate assets, regardless of your car's age.
Drop collision and comprehensive when your car's value falls below $3,000-5,000, when premiums exceed 10% of the car's value annually, or when you have sufficient savings to replace the car. Keep liability coverage at all times—it's legally required and protects your financial future.
The 10% rule says if your annual collision and comprehensive premiums exceed 10% of your car's actual cash value, you should consider dropping that coverage. For example, if your car is worth $4,000 and coverage costs $500/year, that's 12.5%—not cost-effective. Self-insuring often makes more sense at that threshold.
Yes, this is often a smart strategy. Comprehensive is typically much cheaper than collision ($150-250/year vs. $400-600/year) and covers catastrophic events like theft, fire, and weather damage—risks unrelated to your car's age. Dropping collision while keeping comprehensive is a good middle-ground approach for cars worth $3,000-6,000.
No, absolutely not. Liability insurance is legally required in nearly all states regardless of your car's age or value. More importantly, liability protects your assets and income—not your car. You should actually increase liability coverage as you age and accumulate assets, even when dropping collision and comprehensive on older vehicles.