Auto InsuranceQ: If I pay my car off do I still need to carry comprehensive and collision insurance?

A: There are a lot of different factors to consider before changing your auto insurance coverage. While you may have been required to carry full coverage while paying off your car loan, common wisdom says that you should just drop collision and comprehensive insurance as soon as the car is fully yours. However, you may want to ask yourself one very important question before you do.

“Can I do without this car, or do I have a way to replace without carrying comprehensive and collision?”

Collision coverage is for repairing or replacing the vehicle that has been in an accident, whether it is a collision involving another vehicle, crashing into a stationary object, or a one car accident. Collision insurance does not cover injuries or damage to another person’s property. Unless you are absolutely certain that none of these things will ever happen to your automobile, you should retain this coverage if your car falls within the 10 percent rule.

For instance, if your car is a 1998 Chevy worth $2,000 and your collision premium is $200 per year, you may want to drop collision and put the premium in a piggy bank against your next automobile purchase. However, if the car is one of higher value, say a 2003 minivan worth $8000, and your collision premium is $300, you may want to keep that coverage unless you are absolutely certain you have a way to replace that vehicle in the event of an accident. Even a small parking lot bump and thump can lead to thousands of dollars in repair bills.

Comprehensive insurance covers your car in the event of vandalism, theft, fire, damage from weather such as hail, flood, or tornadoes, falling objects, and animal damage. Never underestimate the value of carrying comprehensive insurance until you have hit a large deer late at night on a dark road. Again, unless you are absolutely certain that your car will not be vandalized, get stolen, catch fire, or be damaged by any of the many delights of Florida weather, you probably want this policy. The 10 percent rule can apply to comprehensive policies, too. If this premium comprises more than 10 percent of your car’s value, you can probably skip it.

Insurance is supposed to be a bulwark against the slings and arrows of outrageous fortune. No one expects to become ill, or be in a serious car accident, have someone drown in their pool, or to take a direct hit from a hurricane. Insurance simply makes sure that when the thing you never expected to happen does happen, you are covered. It ensures that you will not experience financial ruin or the loss of everything that you have built for your own life and for your family. An independent insurance agent can help you to build an insurance policy package that will cushion the hits when they do come.