I paid off my vehicle. What coverages should I have
now? I want to make sure my car is covered if I hit someone,
or if someone hits me.
Congratulations on paying off your vehicle and escaping the burden
of car payments.
Of course you'll need to continue to carry at least
state-minimum auto insurance liability coverages on your
You now have the choice to keep or drop physical damage
coverages of collision and comprehensive. Without a lender looking
over your shoulder, it's totally up to you to decide if these
coverages still fit your needs and finances. (See "
Insure your car from the showroom to the
However, if you want the specific protection you're asking about
-- the capability to make a claim with your own car insurance
company to fix your vehicle whether the fault is yours or not --
you'll want to keep collision coverage on your vehicle.
is what covers your vehicle, up to its actual cash value, if it's
damaged in an auto accident. This means if someone hits you,
you hit another vehicle or object, or you overturn your vehicle you
can make a claim with your auto insurer for damages to be
If the damages are too extensive for repairs to be made or make
it uneconomical to repair, then your car insurance provider will
instead pay you the value of the vehicle for the condition it was
in the moment before the accident.
For added protection for your vehicle, I would recommend you
also continue with comprehensive coverage.
Comprehensive insurance covers your vehicle for damages that
result from situations that are "other than collision." This
normally includes such perils as theft, vandalism, glass breakage,
and striking an animal. It will also cover damage sustained
from natural weather events, such as a tornado, hurricane, hail
storm or wind storm.
Like collision coverage, comprehensive pays out for the repair
of your vehicle or the actual cash value if the vehicle is declared
a total loss or is stolen and not recovered.
Both physical damage coverages come with a deductible amount of
your choosing. If you choose a higher deductible, your rates
will be lowered somewhat. And the reverse is true; if you
choose a lower deductible your rates will be a bit higher.
Your lienholder may have dictated what your maximum deductible
was while you were still paying off the car, but now the decision
is all yours. Remember, though, to select an amount that you
can afford since the deductible is what you must pay before your
collision or comprehensive benefits kick in.
If you now have extra money in your budget, due to no longer
having a car payment, and have assets to protect (a house, savings,
and things of this nature), then I'd suggest you not only keep
collision and comprehensive coverage, but also raise your liability
limits if they are low.
Higher liability limits means more protection. State car
insurance coverages typically aren't enough to cover a serious
accident, and if your limits are exceeded you'll be looked at to
personally pay for any remaining expenses. Higher limits,
such as of 100/300/50, give you much better protection -- and it
doesn't have to break the bank.
When you're thinking about changes to coverages, limits or
deductible amounts on your auto insurance policy, it's a good time
to shop around. Comparison shopping can save you hundreds, if
not thousands, a year in premiums. (See "
3 ways to save big on car insurance