In order to legally operate your motor vehicle in the U.S., you must have a car insurance policy in place. The minimum requirements for bodily injury and property damage liability vary by state and must be considered when selecting insurance coverage. These minimums won’t change as your car ages, but the additional coverage you choose to purchase may. Consider making these adjustments as your vehicle becomes older.
When Your Car is New…
If your car still has that new car smell, your best option will be full coverage insurance. A full coverage policy will cover the liability minimums required by your state as well as collision and comprehensive. Comprehensive means if something that’s not your fault (hail, vandalism, etc.) damages your vehicle, your insurance policy will reimburse you up the value of it (minus the deductible, of course). Collision provides the same coverage if something happens that is your fault (slamming into a telephone pole, etc.).
Full coverage is required under most auto loans. However, even if you paid cash for that brand new vehicle, and own it outright, full coverage insurance still makes sense as protection for your investment. According to Kelley Blue Book the average new car price is $33,543.
You may also want to purchase gap insurance. By some accounts, new cars lose 11 percent of their value when you drive them off the lot and 15 to 25 percent more each year. If something happens to your car and your auto insurance policy will only reimburse current value, gap insurance will make up the difference between that sum and what you still owe your lender.
When Your Car is Two to Five…
By now you’ve probably paid off your auto loan (or are close to doing so), so you can ditch the gap insurance if you purchased it. But don’t drop comprehensive and collision coverage just yet. Depending on the original value of your car, it may still be worth more than you’re willing to lose in the even that it’s totaled.Instead, consider adjusting the deductible on your policy. Doing so will lower your annual premium, without the need to sacrifice full coverage.
When Your Car is Six to 11…
If you’ve been itching to get rid of that full coverage, you may now be able to safely do so. Determine the viability of your plan by researching how much your car is currently worth. You can use resources like Kelley Blue Book to do so. Once you know your vehicle’s value, subtract your deductible. The resulting figure is the amount your insurance would pay you (if you have comprehensive and collision) if your car is totaled. Can you afford to lose that much? Is the amount you’ll save each month worth the risk? If you can answer yes to those questions, you might be okay with liability coverage alone.
When Your Car is 12 or Older…
If you’re still paying full coverage at this point, the value of your vehicle may no longer be worth the burden of the higher premium. However, if you’re reluctant to drop to liability insurance alone, talk to your agent about losing collision coverage (which tends to be most expensive) and keeping the comprehensive as protection against events like tornados and theft.
Whether you’re buying your first car or driving one that’s 15 years old, we have policies to fit your needs. Give us a call today for answers to all of your automobile insurance questions.