Is full coverage car insurance necessary? Pros and cons drivers should know

As car prices are rising, so too are the cost of insuring them. Higher costs for replacement parts and vehicle repairs are a primary driver of increasing premiums. According to the Bureau of Labor Statistics (BLS), insurance prices were 11.3% higher in December than the year prior, and if you live in certain states, your premiums could be as much as 50% steeper, leading to substantially higher insurance costs. As a result, many Americans are searching for ways to save on their auto insurance costs. 

One way to do that might be to drop certain coverages from your policy. If you finance your vehicle, your lender or leasing company likely requires you to carry full coverage, which includes comprehensive, collision and liability coverage. However, if you own your car outright, you may be able to drop comprehensive and collision coverage and keep only liability insurance, which most states mandate.

Still, many drivers opt to keep extra protection. Removing comprehensive and collision insurance coverage from your policy could provide substantial savings, but is that even an option? Is it necessary to keep full coverage car insurance? Let's take a closer look.

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Pros of full coverage car insurance

Even if removing some of your full coverage policy saves you a pretty penny, you may opt to keep it for the key benefits it provides, such as: 

Full coverage offers more protection

Liability-only insurance is certainly a more affordable option, but if you're at fault for a car accident, you could be on the hook to pay for costly damages and medical bills. On the other hand, your insurer is much more likely to cover repair or replacement costs for your car if you carry full coverage protection.

"Car crashes are always unexpected, and even for cautious and experienced drivers, an incident could occur that results in the need to file a claim," says Kress Staheli, a Farmers Insurance agent. "Cars and trucks these days are built with high-tech features that cause them to be expensive, so the biggest benefit is that the insurance carrier will pay for the physical damage to your vehicle, and the full cost of the incident (you still pay a deductible) will not come out of your wallet.

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Full coverage provides more reassurance

Driving without comprehensive and collision insurance exposes you to more financial risk in the event of an accident. On the other hand, carrying full coverage may offer you peace of mind knowing that if your car is damaged, your insurance will likely cover most of the expenses, minus the deductible.

Cons of full coverage car insurance

Even though full coverage offers extra protection, it comes at a cost that might not always be worth it. Here are some potential downsides to consider:

Full coverage is more costly

There's a price to pay for the peace of mind that comes with full coverage auto insurance, and it can be significantly higher than a liability-only policy. 

"Full coverage can cost anywhere between two to three times the cost of your state's minimum liability requirement," Miranda Marquit, an insurance agent and financial wellness advocate, notes.

Full coverage may not cover everything 

Don't assume that a full coverage policy covers every expense that could arise from an accident or claim. Policy details vary from one insurance provider to another, so it's important to review your coverage carefully for any gaps. For example, your insurer may not cover medical bills or lost wages if you're involved in a car accident.

Should you keep or drop full coverage car insurance?

If you finance your vehicle, your lender or leasing company likely requires you to carry full coverage insurance. But if you own your car free and clear, exploring whether or not full coverage car insurance is necessary can help you decide if the extra protection is worth the added cost. 

"For the most part, whether it's worth it to pay for comprehensive and collision depends on the value of your car," says Marquit. "Compare how much you're paying for insurance compared to the replacement value of your car. Consider the deductible as well. For example, if your car is worth $3,000 and your deductible is $1,000, you'd only get $2,000 when it comes to your coverage. You might be paying more in that in insurance each year."

"A good rule of thumb is to drop comprehensive and collision coverage when the car is around ten years old, but everyone's financial situation and comfort level is different, so do what you feel is best. After all, insurance is about security and peace of mind," Staheli says.

The bottom line

Deciding what coverages to include in your policy depends on your needs, especially when it comes to full coverage car insurance. So, review your auto insurance policy regularly to make sure your coverage aligns with your needs and remove coverages you no longer need. Carrying minimum liability coverage isn't the only way to save money on your car insurance, either. You can also raise your deductible, improve your credit score or take advantage of discounts from your insurer. Or, perhaps the simplest way to lower your costs is to shop and compare multiple insurance providers to secure the best rate for the coverage you want.