3 Reasons You May Want Full Coverage Auto Insurance, Even If Your Vehicle Is Paid Off

Intro

Imagine the owner of a fully paid-off 2010 Ford F-150, who carried minimal insurance, was involved in a total loss accident and found to be at fault. If they decided to replace it with a similar vehicle, they might find that a 2010 F-150 with around 100,000 miles now costs approximately $18,500, compared to just $13,000 a year ago due to today’s unusual market conditions. This scenario highlights the potential financial pitfalls of carrying only liability insurance on a paid-off vehicle.

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Full Coverage for a Paid-Off Vehicle?

As you’ve likely heard, the average price of new and used vehicles has skyrocketed. Drivers who aren’t in the market are safe from skyrocketing prices. Or are they? Maybe. But even drivers who own their vehicles outright and have no immediate plans to buy or sell a car may be impacted by the uptick in vehicle pricing if they carry minimal insurance and suffer a total loss due to accident, theft, flood, or other mishaps. While one of the rewards for paying off a vehicle is the freedom to carry less insurance, a savvy shopper may want to consider keeping full coverage auto insurance.

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What’s the Difference in Coverage?

Before we discuss why we think some drivers may want to consider maintaining full coverage even on a paid-off vehicle, here is a high-level explanation of the difference between liability and full coverage for drivers who own their vehicles outright:

• Liability Insurance: Covers damages to others if you're at fault in an accident. It does not cover your vehicle.
• Full Coverage Insurance: Typically includes liability, collision, comprehensive, medical payments, uninsured motorist, and rental reimbursement coverage.
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1. Vehicle Prices Continue to Rise, Making a Potential Replacement More Expensive

Revisiting our example at the beginning of this article, consider the owner of a fully paid-off 2010 Ford F-150 (the best-selling vehicle of 2010) with minimum insurance coverage, that is involved in an accident that completely totals their truck. Here’s how the numbers might play out for this unfortunate owner:

• Replacing that 2010 model with a new version would likely cost in the $51,000 range.
• A replacement 2010 F-150 with 100,000 miles or so would cost around $18,500, a 30% increase from the roughly $13,000 value the same vehicle would have had a year ago.

A driver with full coverage insurance would likely see minimal impact to their personal finances should they need to replace a vehicle due to total loss. In today’s market, with vehicle prices at all-time highs across all segments, full coverage insurance may be worth a serious look.

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2. Coverage Beyond Accidents

When deciding which insurance coverage is right, the old adage “the best predictor of future behavior is past behavior” can certainly lead some drivers with impeccable driving records to feel comfortable maintaining minimum insurance requirements. But does an excellent driving record account for other drivers, vehicle theft, poor weather, or natural disasters?

• Flooding due to 2021’s Hurricane Ida destroyed hundreds of thousands of vehicles.
• More than 17% of all vehicle crashes take place in winter driving conditions.
• Parked vehicles are often vulnerable to theft or vandalism.
• Nearly 13% of drivers nationally were uninsured as of 2019.

These possibilities should be factored into the decision whether to maintain full coverage insurance or drop down to liability.

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3. The Cost Difference Between Full and Liability Coverage May Not Be Much

There’s no denying that full coverage auto insurance costs more than only having liability coverage on your vehicle. On average, liability coverage costs around one third of the price of full coverage, with the national annual average insurance costs for liability and full coverage around $700 and $2,000, respectively. On a monthly basis, this would add about an extra $108 to your insurance bill. It should be noted that this is an aggregate number and may not tell the full story, because insurance costs will vary by driver.

As an example, a male, 30-year-old MotorVero employee based in southern California recently increased his auto insurance coverage from liability to full coverage for the two cars on his policy. The combined cost to switch both vehicles from liability to full coverage raised his annual auto insurance bill by a total of roughly $600, or $50 per month.

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Uninsured motorist coverage can be helpful when the other party is at fault and doesn’t have enough coverage. Without it, the policyholder may have to pay for repairs and medical bills out of pocket. And while it’s possible to take legal action against the other party, the process can take time and cause delays in receiving payments.

Collecting quotes from multiple providers may prove helpful for a person looking to get new insurance or upgrade their current coverage. Many factors go into calculating premiums and rates will vary. Age, vehicle type, driving record, and credit (depending on the state) can all play a role in insurance costs. Also, combining renter’s or homeowner’s insurance policies may help soften the overall insurance costs. Additionally, some companies also offer multi-car discounts.

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Other Considerations

The logic for going without full coverage may have been sound in years past, especially for vehicles that are old or aren’t driven frequently. But today, an accident can be more costly than ever. Having full coverage can provide peace of mind, and may prevent a bad situation from getting even worse.

Research and shop with MotorVero. Whether you’re shopping for a new or used vehicle, you can always find the latest deals on MotorVero. And when you’re ready to buy, you can use MotorVero to shop, customize your deal, and get an upfront, personalized offer from a certified dealer. Be sure to check the MotorVero blog for more car shopping and ownership tips and tricks.