Two Decisions, Not One

The most common way people arrive at a minimum-limits policy is by way of an old car. The reasoning goes: the car is not worth much, I own it, so I do not need much insurance. Half of that reasoning is sound and the other half quietly costs people a great deal.

The decision that follows from the car

Whether to carry comprehensive and collision on a vehicle you own outright is a legitimate arithmetic question. Those coverages pay for damage to your car, and the most they can ever pay is roughly what the car is worth, minus your deductible. As a vehicle ages, the gap between what the coverage costs and what it could pay narrows, and at some point it stops making sense.

How to test it honestly: find out what the vehicle is actually worth today, subtract your deductible, and compare what remains against what comprehensive and collision cost you per year. If the coverage costs a meaningful fraction of the maximum it could ever pay, dropping it is defensible — provided you could replace the car if it were destroyed tomorrow. If you could not, the coverage is doing real work regardless of the arithmetic.

The decision that does not follow from the car at all

Your liability limits have nothing to do with what your car is worth. They are measured against what you might damage or whom you might injure — which is determined entirely by what you hit, not what you drive.

A twenty-year-old vehicle can be involved in exactly the same accident as a new one, with exactly the same consequences for the other party. Your old car does not make the other driver's injury cheaper or their vehicle less expensive to replace.

This is the merge that costs people. Dropping physical damage coverage because the car is old is reasonable. Dropping to minimum liability for the same reason is a non-sequitur, and it is the more consequential of the two changes.

What to do instead

1. Decide comprehensive and collision on the arithmetic of the vehicle.
2. Decide liability limits on the arithmetic of your exposure — savings, property, income.
3. Notice that step one usually frees up premium, and ask what it would cost to put some of it into step two.

That third step is the one almost nobody takes, and it is often the best value available on an old-car policy: use the saving from dropping physical damage to buy the liability protection you actually lacked. Whether the numbers work out that way for you depends on your record, mileage, vehicle and carrier — ask for both figures and see.

Before you drop physical damage, check

• Is there a lienholder? If any money is owed on the vehicle, you almost certainly cannot drop it.
• Could you replace the car? Not "is it worth much" — could you get to work next week without it?
• Is anything unusual about it? A vehicle with genuine collector value is a different conversation.
• What about theft and weather? Comprehensive is normally the cheaper half. Some drivers drop collision and keep comprehensive, which is a legitimate middle position worth pricing.

The summary

An old car is a good reason to reconsider coverage on the car. It is not a reason to reduce what protects everyone else. Keep the two decisions apart and you will usually end up with a better policy for similar money. Ask us to price both changes separately so you can see what each one actually does.