You know that you need to carry insurance on your car. But how much insurance do you need? Liability insurance is the basic requirement that covers damage done to another driver or their car or property. Collision coverage covers your car in case of an accident. Comprehensive covers your car from damage that is not resulting from an accident such as windshield chips or vandalism. Together they're commonly referred to as Comprehensive and Collision (C&C) coverage (or full coverage) and are the best way to cover your car bumper to bumper against all damages.
Coverage like this comes at a price – and is worth the cost in some situations. But is it worth it to you? Ask yourself the following questions to find out.
Five Honest Questions To Answer When Considering Full Coverage
1. Do I Own The Car, or Does The Bank?
If you are still making payments on your car, chances are the bank or lender you are with has stipulations about the coverage you need to have. Do not drop your C&C with being certain that you are not going against your loan agreement. That's a simple first step.
2. Is My Car Worth It?
According to financial savings guru, Clark Howard, you should start to think about reducing that coverage when your car is about eight years old. He says that if your cost for the C&C coverage is more than10% of the value of your car, you're probably fine with just liability coverage.
3. Am I a Good Driver?
Is your motor vehicle record spotless? Does the Highway Patrol know you by name? Do you tend to get a ding every now and again? How you answer these predicts how likely you are to file a claim. If you, or your commute, make things a little more interesting, you may want to keep that complete coverage a little longer.
4. How's My Savings Account?
Quick scenario check: You've canceled your coverage and total your car the next day. Can you afford to replace it? Even though you can end up paying more out-of-pocket to keep that coverage, if you can't afford to get a replacement car (or fix a dinged up door), you may want to keep the insurance as a safety net.
5. Do I Need to Feel Secure?
Simply put, some people value security over savings. That's okay. If the thought of cruising downtown with no coverage on your car makes your eyelids twitch and the hair on your neck stand on end, it may not be the route for you. You're not saving anything if it stresses you out. Keeping the coverage is simply paying for the peace of mind.
Keeping these five things in mind, it pays to take a few moments to look at your auto insurance policy to see if you're carrying more insurance than you really need. If cutting your C&C seems too bold to you, perhaps increasing the deductible could give you the savings you'd like without losing that piece of mind. The truth is, it can be just as costly to be over insured as it is to be underinsured. Take the time to make certain that your coverage is right for you.