In other words, she is paying $496 a year to protect herself against a $3,950 loss. Saving nearly $500 a year now could be a great start toward paying off other bills or a newer car.A friendly agent or a single-form car insurance comparison tool like Insurance.com's can make test-driving decisions on your insurance coverage much, much easier. Sometimes the decision is clearer Of course, the value of the car drops with each passing year, and so do the insurance premiums. Say the Ford Focus mentioned above were a 2002 model, worth about $1,700 actual cash value. Minus a $500 deductible, the maximum payout would be $1,200. Full coverage on the car would be $1,108 a year. Minus comp and collision, the bill would be $726. That's $382 a year to insure against a potential $1,200 loss; most drivers would choose to accept the risk and bank the premium because they would be unlikely to find a reliable replacement with that $1,200. There are rules of thumb, too. Financial guru Liz Pulliam Weston says dropping coverage when the premiums reach 10 percent or more of the potential payout makes sense. The example above reaches that threshold. CBS MoneyWatch columnist Kathy Kristof puts a flat dollar value on it: the price of a running car, about $2,000. When your car is worth less than that, drop the coverage. We have our own rules of thumb on insuring any car:
- When the car is new and financed, you have to have insurance. Keep your deductible manageable.
- When the car is paid off, raise your deductible to match your available savings.
- When you would no longer put additional money for a major mechanical repair into the car - for a new transmission or engine - seriously consider dropping comprehensive and collision.