The right time to reduce your coverage to the minimum car insurance required by your state might be today or it might be never.
The 10-year mark is a good time to reevaluate your car insurance needs, but there’s more to making coverage decisions than your car’s age alone.
According to Bankrate, the national average cost of full coverage car insurance is $2,679 while minimum coverage averages just $808.
Dropping your coverage has the potential to lower your insurance premiums by around $1,800. Whether that $1,800 per year in savings is worth the increased risk you face by not having comprehensive or collision coverage will depend on a lot of factors. Here’s what you need to think about before you decide.
How Much Would You Save by Switching to Minimum Coverage?
At a certain point, the premiums you’re paying for full coverage aren’t worth the payout you’d get if your car was totaled. The first step to figuring out if you’ve reached that point yet is figuring out the dollar amount you’d save on premiums each year.
As mentioned earlier, you could be looking at around $1,800 per year in savings based on national averages. But it’s a good idea to check with your insurer to get a more precise estimate.
Each state has its own minimum coverage requirements and the insurance rates you pay depend on so many different factors that your premiums could be significantly higher or lower than the national average mentioned above.
In some cases, you can use your insurer’s online portal to get instant estimates on your premiums based on different coverage scenarios. If your insurance provider doesn’t offer that, call them up and ask how much your premium would be if you reduced coverage to the minimum requirements in your state.
Once you have that number, you know how much you would actually save by switching car insurance. The next step is to figure out how much financial risk you’re exposing yourself to by dropping coverage. That part isn’t quite as straightforward.
How Much Can You Expect Your Car Insurance to Pay?
To decide if full coverage is worth its weight in premiums, you need to estimate the maximum payout you could possibly receive if your car was damaged by something covered in the comprehensive or collision coverage you’re thinking about dropping. To do that, answer the following questions:
