Should I change my coverage to liability only? I paid off my car.

October 28, 2015

Are comprehensive and collision required?

Lenders typically require you to carry full coverage, which includes both comprehensive and collision coverage. Once you have made the final payment, you are no longer obligated by the lender to keep full coverage. There is also no law in the state of Arizona which declares that you must have this coverage. So if it’s no longer needed to satisfy your lender, and it’s not required by the state, why do you need it? It’s important to consider what these coverages are and how they are used, as well as the minimal savings you may see compared to the value of your vehicle.

What do these coverages actually cover?

Comprehensive and collision coverages are for damage to your vehicle and are subject to the specified deductible. Collision is defined as the upset of your auto or its impact with another vehicle or object. This can include instances where one may hit a pole or guardrail, or hit another vehicle. Comprehensive coverage is simply stated as anything other than collision. This includes the three main ways that it is utilized — fire, theft, or vandalism. Two other items generally covered under comprehensive involves contact with a bird or animal and breakage of glass.

Can you provide an example?

Now that we know what these coverages do, you may already be convinced that you need them. Some may still be tempted by the savings, and the savings may be worth it, but it’s extremely important to weigh your options. Vehicles can be one of the biggest assets that people own, especially once it’s 100% yours. If you suddenly lost your car and didn’t get anything from your insurance, would it be worth it? For example, let’s say your car is worth $5000. Your auto insurance premium is $1500 annually for full coverage ($500 deductibles for comprehensive and collision, as well as 100/300/100 for liability). You decide to save some money by removing comprehensive and collision, and your agent tells you that your new premium would be $1000 a year. That translates to a savings of $500 a year, and only $42 a month. If your car is stolen or totalled in an at-fault accident, among other situations, you would get nothing for it. Suddenly you have lost your $5000 asset, in lieu of saving $500 a year. For some, this may be worth it, but for others it would be a detriment to their everyday life.

It’s up to you to decide if you want or need these coverages. You should weigh out the options and potential savings and decide what makes the most sense for you. Feel free to contact us at Pinnacle Insurance Agency (480-513-3131) to discuss your coverage options and potential savings.


Disclaimer: Not all insurance policies are the same. Coverages and exclusions may vary and all statements made here are based of off a normal auto policy. As of 2015, Arizona does not legally require comprehensive or collision coverage. Please always follow the law.