When Should You Drop Full Coverage on Your Car?
Last Updated on December 10, 2025
When you finally pay off your car, it’s natural to look for ways to cut your monthly expenses. One of the first ideas many drivers have is to drop full coverage from their auto insurance. In some situations, that can be a smart financial move. In others, it can leave you without enough protection if your car is damaged or totaled.
Deciding when to drop full coverage depends on the value of your car, your budget, and how much risk you’re willing (and able) to take on yourself.
Key Takeaways
- Full coverage isn’t a special policy type – it’s usually liability plus comprehensive and collision, which protect your car from crashes, theft, weather, and other damage.
- As your car’s value drops, the benefit of full coverage shrinks, especially once your loan is paid off and you’re no longer required to carry it.
- A common rule of thumb: if the yearly cost of your full coverage is more than about 10% of what you’d get after your deductible in a total loss, it may be time to drop it.
- Keep full coverage if your car is still valuable or hard to replace, you don’t have much savings, or you drive and park in higher-risk situations where damage is more likely.
What Full Coverage Insurance Really Covers
Full coverage car insurance usually means you carry both comprehensive and collision coverage in addition to your state’s required liability insurance. “Full coverage” isn’t a specific policy type or a legal term – it’s just shorthand for having broader protection for your own vehicle.
Comprehensive and collision coverage are not required by state law. States typically only require liability insurance, which pays for other people’s injuries and property damage when you’re at fault. Comprehensive and collision are there to protect your car from costly repairs or a total loss.
What comprehensive and collision usually cover
While exact coverage can vary by insurer and state, full coverage (liability + comprehensive + collision) usually protects you against things like:
- Accidents involving animals (like hitting a deer)
- Objects falling on your car (tree branches, debris, etc.)
- Weather damage (hail, wind, flooding, storm damage)
- Fire
- Theft and attempted theft
- Vandalism and malicious mischief
- Single-car crashes (for example, hitting a guardrail or backing into a pole)
- Damage to your vehicle when you are at fault in an accident
By contrast, the liability-only coverage required by your state pays medical expenses and property damage for the other driver if you’re at fault – but it does nothing to repair or replace your own car.
Full coverage also doesn’t pay for everything. Normal maintenance and wear and tear, mechanical breakdowns, and routine repairs are almost never covered, regardless of how much insurance you buy.
How much does full coverage cost?
One big reason drivers wonder when to drop full coverage is simple: it’s more expensive than minimum coverage. Because comprehensive and collision pay to repair or replace your car, they add a significant cost to your premium.
In many states, full coverage can cost two to three times more than a minimum-liability policy. The exact difference depends on factors like your state, driving record, age, vehicle, and coverage limits, but for a lot of drivers, full coverage adds hundreds of dollars per year to the bill.
Use the table below to compare the typical difference between full coverage and minimum coverage in your state. This can give you a sense of how much you’re really paying to insure your own vehicle versus just carrying the legal minimum.
| State | Average Minimum Coverage Rates | Average Full Coverage Rates | Yearly Difference |
|---|---|---|---|
| Alabama | $541 | $2,207 | $1,666 |
| Alaska | $498 | $2,330 | $1,832 |
| Arizona | $795 | $2,515 | $1,720 |
| Arkansas | $457 | $2,193 | $1,736 |
| California | $653 | $2,692 | $2,039 |
| Colorado | $650 | $3,200 | $2,550 |
| Connecticut | $826 | $2,187 | $1,361 |
| Delaware | $998 | $2,636 | $1,638 |
| District of Columbia | $762 | $2,437 | $1,675 |
| Florida | $1,308 | $3,950 | $2,642 |
| Georgia | $813 | $2,610 | $1,797 |
| Hawaii | $415 | $1,652 | $1,237 |
| Idaho | $343 | $1,425 | $1,082 |
| Illinois | $682 | $2,316 | $1,634 |
| Indiana | $424 | $1,639 | $1,215 |
| Iowa | $317 | $1,683 | $1,366 |
| Kansas | $631 | $2,630 | $1,999 |
| Kentucky | $771 | $2,558 | $1,787 |
| Louisiana | $953 | $3,626 | $2,673 |
| Maine | $398 | $1,517 | $1,119 |
| Maryland | $984 | $2,496 | $1,512 |
| Massachusetts | $416 | $1,646 | $1,230 |
| Michigan | $1,210 | $3,375 | $2,165 |
| Minnesota | $650 | $2,044 | $1,394 |
| Mississippi | $514 | $2,061 | $1,547 |
| Missouri | $610 | $2,437 | $1,827 |
| Montana | $380 | $2,228 | $1,848 |
| Nebraska | $516 | $1,994 | $1,478 |
| Nevada | $1,142 | $3,564 | $2,422 |
| New Hampshire | $419 | $1,646 | $1,227 |
| New Jersey | $1,030 | $2,563 | $1,533 |
| New Mexico | $523 | $2,216 | $1,693 |
| New York | $1,661 | $3,848 | $2,187 |
| North Carolina | $491 | $1,702 | $1,211 |
| North Dakota | $362 | $1,655 | $1,293 |
| Ohio | $404 | $1,530 | $1,126 |
| Oklahoma | $510 | $2,560 | $2,050 |
| Oregon | $789 | $1,956 | $1,167 |
| Pennsylvania | $522 | $2,791 | $2,269 |
| Rhode Island | $800 | $2,683 | $1,883 |
| South Carolina | $657 | $1,886 | $1,229 |
| South Dakota | $334 | $1,939 | $1,605 |
| Tennessee | $459 | $1,807 | $1,348 |
| Texas | $697 | $2,627 | $1,930 |
| Utah | $700 | $1,942 | $1,242 |
| Vermont | $311 | $1,359 | $1,048 |
| Virginia | $677 | $1,990 | $1,313 |
| Washington | $563 | $1,674 | $1,111 |
| West Virginia | $488 | $1,904 | $1,416 |
| Wisconsin | $425 | $1,739 | $1,314 |
| Wyoming | $270 | $1,581 | $1,311 |
| US Average (Approx.) | $682 | $2,637 | $1,955 |
The Value of Your Car Determines When to Drop Full Coverage
One of the biggest deciding factors in whether you should keep or drop full coverage is what your car is actually worth today, not what you paid for it originally.
You can get a ballpark estimate of your car’s value by checking resources like the Kelley Blue Book value or comparing it to similar cars for sale in your area. Remember that your insurance company pays the vehicle’s actual cash value (ACV) – essentially its current market value – minus your deductible if it’s totaled.
Factors that affect your car’s value
- The age of your vehicle
- Total mileage on the odometer
- Wear and tear on the interior
- Body damage, defects, or rust on the exterior
- Extra features or packages (safety tech, premium trim, aftermarket upgrades)
If your car’s value has dropped significantly since you bought it, full coverage may not be cost-effective once the loan is paid off. In some cases, even if you keep full coverage, it makes sense to adjust your deductibles and limits so they better match the car’s current value.
For example, if your vehicle is worth around $4,000 and you carry a deductible of $1,000, the maximum payout after a total loss would be roughly $3,000 (minus any fees or salvage value). If you’re also paying for very high property damage liability coverage limits, you may be paying for more protection on the car itself than you can realistically benefit from.
On the other hand, if your car still holds a high market value – or would be difficult for you to repair or replace out of pocket – keeping your full coverage is often worth the extra premium.
Other Factors to Consider About Dropping Full Coverage
Once your car is paid off, there’s no lender forcing you to keep full coverage. But that doesn’t automatically mean you should drop it. Before you decide, think through a few more factors.
Your savings and ability to pay out of pocket
One of the best reasons to drop full coverage is that you can comfortably handle the cost of repairs or a replacement vehicle on your own.
If you have a solid emergency fund and could buy a similar car (or get by without one) if yours were totaled, you may not need comprehensive and collision. Instead of paying the insurer for full coverage, you might prefer to save that money for your next car.
If you don’t have much in savings and would struggle to replace your car, full coverage can be a valuable financial safety net.
Your deductible and premium trade-off
If you have high deductibles on your full coverage already, you’re taking on more risk in exchange for a lower premium. At some point, the coverage may not be pulling its weight.
For example, if your car is worth $3,000 and you carry a $1,500 deductible, the maximum potential payout is only about $1,500. In that case, you may decide it’s better to drop full coverage, lower your premiums, and set aside the savings in an emergency fund for repairs.
Your budget and upcoming plans
If your monthly budget is tight, you might choose to decrease your car insurance coverage and redirect the savings toward a financial goal, such as:
- Saving for a down payment on a newer vehicle
- Building an emergency fund for repairs or unexpected expenses
- Paying down high-interest debt
If you expect to buy a newer car soon, temporarily lowering coverage on your older car can help you save faster – as long as you’re comfortable with the extra risk in the meantime.
How and where you drive
Consider your driving habits and environment:
- Do you have a long, busy commute or drive primarily in heavy traffic?
- Do you live in an area with high theft, vandalism, or severe weather risk?
- Do you park in a locked garage, carport, or on the street?
The more exposure you have to crashes, crime, and weather damage, the more valuable comprehensive and collision coverage become – even on an older vehicle.
Lender or lease requirements
If you still owe money on your car or you’re leasing it, your lender or leasing company will almost always require full coverage. In that situation, you typically can’t drop comprehensive and collision without violating your contract. Once the loan is paid off and the title is in your name, you gain the freedom to reduce coverage.
When to Drop Full Coverage: The 10 Percent Rule
A popular guideline for deciding when to drop full coverage is the 10 percent rule. It’s not perfect, but it gives you a quick way to check whether you’re paying too much for the protection you’re getting.
Here’s how it works:
- Estimate your car’s current market value (what it would sell for today).
- Subtract your collision/comprehensive deductible to find your maximum potential payout if the car is totaled.
- Compare your yearly full coverage cost (the extra you pay for comprehensive and collision) to that payout.
If the annual cost of your full coverage is more than about 10% of the amount you’d receive if the car were totaled, you probably don’t need full coverage insurance anymore.
Example 1: Dropping full coverage may make sense
Say your car is worth $3,000 and you have a $1,000 deductible. Your maximum payout for a total loss is about $2,000. If you’re paying roughly $300 per month for full coverage versus minimum coverage – $3,600 extra per year – you’re paying more in a single year of premiums than you could ever get back in a claim.
In that case, it usually makes sense to drop down to liability-only coverage, save a couple hundred dollars per month, and set aside some of that money for repairs or your next car.
Example 2: Keeping full coverage is probably wise
Now imagine your car is worth $10,000 and you have a $1,000 deductible. Your maximum payout is roughly $9,000. If full coverage only costs a few hundred dollars more per year than minimum coverage, you’re paying a relatively small amount to protect a large asset.
In this situation, keeping full coverage makes more sense – especially if you would struggle to replace a totaled vehicle out of pocket.
FAQs on Dropping Full Coverage
Bottom Line: Treat Full Coverage Like a Financial Tool
Dropping full coverage is less about whether your car is “old” and more about whether the coverage still makes financial sense for you. As your vehicle ages and loses value, the protection it provides shrinks, while the premium may stay relatively high.
In general, it may be time to drop or reduce full coverage when:
- Your car’s value is low enough that a total loss payout would be small after your deductible
- You have enough savings to repair or replace the car yourself
- Your full coverage premium is more than about 10% of your car’s net value each year
- You’d rather put the money you save into an emergency fund or future vehicle
However, if your car is still valuable, you have limited savings, or you drive in higher-risk conditions, full coverage can still be a worthwhile investment – even on a vehicle that’s no longer brand new.
