One of the most frequently asked questions about automobile insurance for those who own an older vehicle is when is it no longer economically wise to carry comprehensive collision coverage on that vehicle. For most, the 10% rule is a reasonable guideline. Here is how it works.
The 10% Rule Defined
The 10% rule is based on the premise that you should consider dropping your collision and comprehensive automobile insurance coverage when the cost of such coverage meets or exceeds 10% of the book value of the car. It sums that the MOST you can get to repair your vehicle is its book value so paying 10% or more for that protection provides diminishing returns.
Let’s take, for example, your vehicle has a book value of $5,000. Ten percent of this value would be $500. If the premium for the comprehensive collision coverage portion of your policy exceeds $500 annually, it is probably no longer a good value to maintain that coverage. You may be better off reducing coverage to just liability. Of course, it will depend on your tolerance for risks. You my also lose some other valuable protection by eliminating comprehensive collision coverage. It is best to ask your independent insurance agent how such a reduction will impact your coverage.
Why Minimum Coverage May Not Always Be Best
Understandably, most don’t want to pay any more than they have to for automobile insurance. This, like most things in life however, doesn’t necessarily mean you should get the cheapest or least expensive plan available. Just because states have minimum standards does not mean that may be sufficient for you. You may benefit considerably through the acquisition of under or uninsured motorist insurance, a rent-a-car provision when experiencing a loss of use or even higher minimums of overall coverage. This is particularly true for those who have more financial resources at risk.
One of the best solutions when you have questions about your automobile insurance coverage is to get an auto insurance review. If you prefer, your review can also include a quote from multiple insurance companies who compete for your business. This allows you to base your choice on value, not just price. Contact one of our independent insurance agents and get started today! Get the protection you need without overpaying for your automobile insurance.
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