WalletHub, Financial Company
You do not need full coverage insurance on a used car unless the vehicle is leased or financed. Even though no state requires full coverage insurance, is still recommended for a used car if you cannot afford to repair or replace the car after an accident or other unexpected event. Full coverage is not an official type of insurance, but it usually refers to a policy that includes collision and comprehensive coverage in addition to the state’s minimum required car insurance.
When deciding if you should buy full coverage insurance for a used car, consider the car’s value, your savings, and where you live. For example, dropping full coverage could be worth it if you have an emergency fund that could comfortably cover the cost of repairs or a new car. But even if you could cover the loss yourself, it’s wise to keep full coverage if your car is particularly valuable or you are especially likely to file a collision or comprehensive claim.
A general rule of thumb is to drop full coverage when the combined collision and comprehensive premium equals 10% of your car’s value. But a lot depends on your own financial situation and vehicle.
R. Joseph Ritter Jr., Financial Advisor
Maybe and maybe not. A lot of it depends on the cost of coverage vs. the value of the vehicle. For vehicles with little value, the smarter decision is to keep savings on hand to replace the vehicle and skip the collision coverage. Even if you don't have a lot of savings, the question becomes how much will collision pay to replace the vehicle. If this is a decent amount of money and you don't have the savings to cover a replacement vehicle, then it may be wise to keep collision.
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