You just paid off your vehicle! Congratulations! That is awesome! There’s no better feeling than not owing money to the bank and you have your awesome vehicle. Congratulations.
When Should I Remove Full Coverage From My Car?
That is the question we are going to address today. We get phone calls weekly from clients of ours that call and say, “hey, I just paid off my vehicle. I no longer have the loan with the bank. Can I now remove full coverage from my insurance policy?” So that’s the question we are going to address today. If you pay off your vehicle and you don’t have a loan, should you remove full coverage from your insurance policy?
And the reason we get this question is because most every single bank out there, if they give you a loan on your vehicle, they are going to require you in that contract to carry what people refer to as “full coverage”. Full coverage means something different to everyone, but generally it is comprehensive and collision coverage.
They’re looking to save a little bit of money and not have full coverage on their vehicle. We’re gonna talk about that and we’re gonna give you the question that only you can answer. And by answering that question, you will know if you should keep full coverage on your vehicle or if you should remove it.
Why The Bank Requires You To Have Full Coverage
So here’s the first thing that we need to talk about. Even though the bank requires you in the contract to carry full coverage. That is not why you’re carrying full coverage on your vehicle. You’re not putting coverage on your vehicle to satisfy the bank.
Rather you are putting the correct coverage on your vehicle to protect yourself financially.
So that’s the first thing to understand. Coverage has nothing to do with the bank. It has everything to do with protecting you financially and here is the question that we need to ask and only you can answer and this question has nothing to do with the bank.
Are you ready for the question?
If something happens to my vehicle, am I financially prepared to replace it or repair it?
That’s the question. That’s it and that’s something that only you can answer. So as I mentioned, we are not putting full coverage on the vehicle because of the bank.
We’re putting full coverage on the vehicle to protect your financial situation, full coverage or in other words, comprehensive and collision is protecting your vehicle. So if something happens to your vehicle and there’s damage to it or it needs to be completely replaced. If you do not have comprehensive and collision coverage well, you’re gonna be out of luck. Your insurance company is gonna tell you, “hey, I’m sorry that happened to your vehicle but we are not helping you repair or replace it”.
Now if you hear that and you say it’s okay, I have a 1993 Honda civic, I no longer have a loan on it. It’s worth $500. Yes, I have $500 in the bank. I can go out and replace that vehicle. In that case yes, take full coverage off the vehicle. You’re financially prepared to take care of that.
On the other hand, let’s say you have a 2020 Chevy Tahoe, and it’s still worth $30,000 and you just paid it off really quickly. If something happens to it and you have to replace or repair it, do you have $30,000 in the bank to easily say “no big deal I can go out and buy a new one”? If your answer to that is yes then you’re good. You can consider removing comprehensive and collision, but if the answer to that is no, I don’t want to be on the hook for $30,000 to repair my vehicle if something happens to it then you need to keep comprehensive and collision coverage on your vehicle.
So really when it comes down to it, it’s as simple as that, just ask yourself that question. If something happens to my vehicle and I have to repair it or replace, it am I financially prepared and willing to do so? If the answer is yes, consider taking full coverage off.
If the answer is no, you need to keep it on regardless of what the bank says, the bank is concerned about their financial interests, not yours. So you need to be concerned about your financial interest, not the banks.