Should I Drop My Car's Insurance Down to Liability?

Full coverage automobile insurance includes comprehensive car and collision coverage in addition to liability coverage. In many states, you can cut your car's automobile coverage back to liability insurance only.

Benefits

Reducing your auto coverage to liability only will save you money. According to MSN Money, eliminating collision and comprehensive coverage from your insurance policy will save you an average of $437 per year as of 2007.

Warning

In the event of a crash, liability insurance will cover other people's repairs and injuries only. Dropping collision and comprehensive coverage could leave you out of a vehicle or shelling out thousands of dollars for repairs.

Considerations

If you financed a car with a loan, liability-only coverage is not an option. Lending agencies require you to carry full coverage on an automobile that you have not yet paid off. However, if you own an older, low-value automobile, switching to liability-only coverage may be the best financial decision. In addition, if you do not have cash saved up, purchasing a new car at reasonable loan rates immediately after an accident will be very difficult.

References

• MSN Money: Dump the Insurance on Your Clunker
• Car Insurance Rates: Full Coverage vs. Liability -- Which is Better?