Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Melanie Musson is the fourth generation in her family to work in the insurance industry. She grew up with insurance talk as part of her everyday conversation and has studied to gain an in-depth knowledge of state-specific insurance laws and dynamics as well as a broad understanding of how insurance fits into every person’s life, from budgets to coverage levels. Through her years working in th...

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Reviewed by Melanie Musson
Published Insurance Expert Melanie Musson

UPDATED: Mar 13, 2020

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You have paid off your vehicle, and plan on keeping it for a few more years. However, you find that the value of your vehicle does not equal what you are paying in insurance premiums every six months. Should you drop some of your coverage? If so, how do you go about choosing which policies to drop, and how do you communicate this to your insurance company?

Financed Vehicles

While your car is financed, you probably do not have a choice about dropping collision or comprehensive insurance. Although these types of insurance are considered “optional” as opposed to liability, which is required by most states, you may not have the option of refusing them if your car is financed by a third party. This is because third parties require their investment to be protected; if you dropped your comprehensive or collision coverage and your car was then stolen or you crashed it, the company could not repossess it to pay off your loan. When you finance a vehicle, the purchase contract usually stipulates that you will maintain “full coverage” insurance on the car, including liability, collision, and comprehensive coverage.

Vehicles with No Liens

Once your car is paid off and you have the title, however, it is up to you to determine if you still need these additional policies. One way to make this decision is to consider your circumstances. While comprehensive and collision coverage is relatively expensive, do you have the cash available to replace your car if it was stolen? What if you caused major damage to your car by crashing it? If you cannot afford to replace your car yourself, even with a used model, it is wise to keep this coverage.

Should I keep full coverage car insurance?

However, some people have a car which is so old and worth so little that it does not seem wise to keep this type of coverage on the vehicle. There is a simple formula you can use to determine if this is true in your case: take the “book value” of the vehicle and divide it by six. If your comprehensive and collision premiums are more than this amount, you may be overinsuring your vehicle. For example, if your vehicle is worth $600, your six-month renewal premiums for comprehensive and collision should not be more than $100. If your premiums are $200 per six-month renewal for comprehensive and collision, you could save the amount to replace your vehicle in a year and half and avoid these premiums altogether. This is a form of “self-insurance” and it makes sense if you plan to keep your vehicle for some time.

On the other hand, it does not make sense to drop your comprehensive and collision coverage if you need your vehicle for travel to work or school and you simply do not have the money to replace it. In that case, you are better off paying your premiums to insure yourself against potential loss.

How do I drop collision or comprehensive coverage?

If you decide to drop your collision and comprehensive coverage, the procedure is relatively simple. You have already paid for six months of coverage when you last renewed your policy, so you will be covered until your next renewal date. When you receive your next renewal notice, call your insurance agent and inform him or her that you do not want to keep comprehensive and collision on your vehicle. The agent will send you a revised renewal notice that reflects this choice with a new, lower premium. Alternatively, you can visit your agent or call your insurance company and request that your coverage be dropped immediately. Some insurance companies allow you to do this online, and you can go into your account and remove this coverage yourself. If you change policy options mid-term between renewals, you should receive a pro-rated refund of any premiums you have already paid towards this coverage. Of course, you will be without this coverage from the day you notify your company and they make the change.

You can compromise between removing collision and comprehensive and paying high premiums for this coverage by adjusting your deductibles for these policies. For example, if your collision coverage has a $250 deductible and you raise it to $1,000, you will cut your premiums significantly. However, you will have to pay more out of pocket if you wreck your car. For a very old car with a very low book value, raising your deductible to more than the value of the car is not wise; it is better to drop your collision coverage altogether and avoid paying the premiums for this coverage.

How much can I save by dropping collision and comprehensive coverage?

This really depends on your unique car insurance policy but it’s typically possible to save well over 50% by carrying liability insurance only. However before making any decision always compare car insurance quotes from multiple providers. Many drivers end up keeping some form of collision or comprehensive coverage but just take lower coverage limits or switch providers who have more affordable premiums.