When to Drop Full Coverage Insurance on Your Older Car

  1. Full coverage car insurance is beneficial for drivers as it allows them to replace their vehicles after an accident without bearing the entire cost of a new car.

However, as Mtzvirals found, after a car reaches 10 years of age, it might be wiser to switch to liability-only coverage or consider buying a newer vehicle.

The analysis shows that as time passes, the annual cost of carrying full coverage on a midsize vehicle can approach 50% of the car’s value.

This becomes especially apparent after a decade, where the combined expense of insurance and the deductible for an at-fault accident could exceed the car’s value if it’s more than 10 years old.

Insurance Key findings Board

full coverage car insurance becomes a questionable investment for vehicles over 10 years old, as the annual insurance cost can reach up to 46% of their value.

After an at-fault crash, the rates are likely to exceed the value for vehicles 15 years or older. In some cases, it may be more sensible to buy a new vehicle after a crash instead of relying on insurance to replace a totaled one.

Taking into account typical surcharges after an accident, the difference between yearly insurance rates and the value of a vehicle is often less than $1,000 for cars older than 10 years.

While the cost to insure midsize sedans remains relatively consistent, newer and older Honda Civic vehicles were found to be the most expensive to insure among major providers.

Full coverage insurance for older cars is often too expensive

Based on the comparison between insurance costs and the value of insured vehicles, full coverage remains a worthwhile investment for cars that are 10 years old or newer.

For instance, the average cost of insuring a 5-year-old midsize car with full coverage is $2,010 annually, while the average value of these cars is $7,501.

Moreover, if your car were to be totaled in an at-fault accident, it would still make practical sense to replace your vehicle using comprehensive or collision coverage if it is a decade old or newer, even after considering potential future cost increases and deductibles.

What is a deductible?

A deductible is the sum you must pay before your insurance coverage takes effect and starts covering losses, including damages covered under your car insurance’s comprehensive and collision provisions.

In the study mentioned, the driver had a $500 deductible, but your deductible might be higher, possibly exceeding $2,000.

Following an at-fault accident, the typical insurance cost for a midsize car increases by 93%.

Taking into account the deductible, the average annual insurance cost for a 5-year-old car rises to $4,389. Although this new rate would be 59% of the car’s value, drivers would still save $3,111 compared to covering the expenses of replacing the damaged car themselves.

This amount exceeds the savings held by more than half of people in the U.S., as reported by the Consumer Financial Protection Bureau, which is $3,000 or less.

After ten years, the benefits of having full coverage for a vehicle start to diminish. On average, ten-year-old cars have a value of $5,067 and cost $1,758 per year to insure before any accidents. For drivers with clean records, insurance rates represent 35% of the car’s value, but after a crash, it increases significantly to 79%.

In essence, there’s only a $1,131 difference, which includes the deductible, between the value of a decade-old car and the cost to insure it.

In our analysis, we found that the gap between the cost to insure a Honda Civic and its value was $2,405, while models from Ford, Chevrolet, and Toyota fared worse. For the Fusion, Malibu, and Corolla, the value of the vehicle was only $706 more than the insurance cost.

Certain drivers might find it more cost-effective to purchase a newer car directly instead of opting for higher future insurance rates after an accident.

Between 10 and 15 years after a vehicle’s model year, full coverage proves to be an unwise investment.

While the cost of full coverage alone may not exceed the car’s value, the insurance cost is more likely to surpass the vehicle’s worth after an accident. On average, insuring a 15-year-old car after an accident represents 105% of its value.

As a car ages, the justification for paying higher premiums for full coverage diminishes. The driver would end up paying higher quotes for full coverage but might not be able to use their insurance to cover the entire cost of replacing their totaled car.

After two decades, the cost of full coverage car insurance would equal 141% of the vehicle’s value. After 25 years, ValuePenguin estimates that the cost of full coverage insurance would be a staggering 188% of the car’s value.

Benefits of switching to minimum coverage insurance

Maintaining car insurance that includes comprehensive and collision coverages is a prudent financial decision for vehicles under a decade old. For instance, insuring a 5-year-old car amounts to only 27% of the car’s value, making it a sensible investment.

Cars models that hold the most value

According to our analysis, the Honda Civic experienced a lower depreciation rate of 29% every five years, on average, compared to the Toyota Corolla, Chevrolet Malibu, and Ford Fusion, which were likely to lose 34% of their value yearly, on average.

Purchasing full coverage for a Civic proved to be the most favorable investment over a 15-year period. Even after 15 years and one at-fault claim, the value of a Civic still exceeded the cost of insurance by $947.

On the other hand, all other models at this age were expected to be more expensive to insure than their worth.

Frequently asked questions

Are older cars cheaper to insure?

Yes, most older cars are cheaper to insure, especially when it comes to comprehensive and collision insurance. As cars age, their value decreases, leading to reduced potential insurance payouts after an accident. However, this may not be the case for classic or collector cars.

Should I have full coverage on a 15-year-old car?

Most of the time, having full coverage on an older car isn’t a wise financial decision. After an accident, the insurance payout will likely be close to the actual cash value of the vehicle, which might not be significantly higher than the extra insurance cost.

Can I get full coverage on an old car?

Yes, you can get full coverage on an older car, but it may not be the most financially beneficial choice. Insurance rates could approach or even exceed the value of the vehicle.

How much car insurance do I need for an older car?

The necessary insurance for an older car usually includes liability coverage and, in some states, personal injury protection. While full coverage is often recommended, its value decreases significantly with an older car.

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