Do I Need Full Auto Insurance Coverage?

Full auto insurance coverage refers to collision and comprehensive protection. This type of coverage may not be required under state law but if the vehicle purchase was financed, the lender may insist that the buyer keep full coverage in place until the car is paid off in full.

Collision coverage pays for the cost of repairs to the driver’s own vehicle following an accident which involves making contact with an object or a roll-over. If the car is totaled in the accident, it pays out based on its cash value. The lender will be compensated first, and any additional money is paid to the vehicle owner.

Comprehensive coverage pays for damage to the vehicle stemming from a loss other than one sustained in a collision. It pays for damage caused by severe weather, flooding or vandalism. This is the coverage which pays out if the car is stolen and not recovered as well.

A new car owner will probably want to keep full auto insurance coverage in place to protect the vehicle. Once the car has been paid off, a driver can consider whether to drop the collision coverage entirely and to limit the comprehensive protection to fire and theft only. Since this insurance pays out based on the vehicle’s cash value, it may not make good economic sense to keep full auto insurance coverage in force for an older model vehicle.