Reviewing your car insurance coverage every year

Why a yearly car insurance review matters

A car insurance policy is set up for your life as it was when you bought it. Cars lose value, loans get paid off, children start driving, people move and commutes change. Each of these can make some coverage unnecessary or leave another part too thin.

The NAIC advises checking the details on your policy, including your address, how each car is classified, the discounts applied, the make and model, and every driver's date of birth, and updating the policy whenever you add or remove a car or driver, replace a car or change your annual mileage. Errors in these details can mean paying for the wrong risk.

New Jersey's buyer's guide notes that drivers there can change coverage and limits at any time, and if a change saves money, they have a right to a refund of unused premium within 60 days. Other states have their own rules, and insurers generally allow mid-term changes.

Dropping collision and comprehensive on older cars

Collision and comprehensive pay to repair or replace your own car. They can never pay more than the car is worth, minus your deductible. As a car ages and loses value, the most these coverages can pay shrinks, but the premium does not always fall at the same pace.

The rule of thumb

The Insurance Information Institute (Triple-I) suggests that if your car is worth less than 10 times the premium for collision and comprehensive, the coverage may not be cost effective. To apply it:

1. Find the yearly cost of collision and comprehensive on your declarations page (add both, and double a six-month figure).
2. Multiply that cost by 10.
3. Look up your car's current value using dealer quotes or pricing guides, as Triple-I suggests.
4. If the car is worth less than the result, dropping the coverage may save more than it would likely pay out.

The NAIC's version of the same advice is short: compare the premium to what your car is worth.

Before you drop the coverage

• Check your loan or lease. Lenders typically require collision and comprehensive while you owe money on the car.
• Ask whether you could replace the car. If losing the car would leave you unable to get to work and you could not afford another, keeping comprehensive or collision may still make sense.
• Consider dropping only one. Comprehensive is priced separately from collision and covers theft, fire, hail, flooding and animal strikes. Some drivers keep comprehensive and drop collision.
• Raise the deductible first. A higher deductible can lower the cost while keeping protection against a total loss.
• Check state options. The California Department of Insurance notes that drivers without collision can consider uninsured motorist property damage coverage, which pays for damage caused by an uninsured driver.

Read more about whether full coverage car insurance is worth it for your car.

Removing rental and roadside cover you already have elsewhere

Rental reimbursement pays for a rental car while yours is repaired after a covered claim. Roadside assistance pays for towing, jump-starts, lockouts and similar help. Both are optional extras, and you may be paying for them twice.

Before you remove an extra, make sure the other source really covers you in the same situations. And note that rental reimbursement is different from the question "does my insurance cover a rental car" when you rent on a trip; that depends on your liability and physical damage coverage, not on rental reimbursement.

Once a car loan is paid down so that you owe less than the car is worth, gap insurance no longer has anything to pay, so it may be worth removing.

Raising liability limits wisely

The yearly review is also the time to check whether your coverage is too low. Liability coverage pays for injuries and damage you cause to others. If a claim is larger than your limits, the injured people can seek the difference from you personally.

Signs your liability limits may be too low:

• You carry only your state's minimum. The minimum is a legal floor, not a measure of what a crash costs. Our state minimums tool shows each state's legal floor.
• Your savings, home equity or income have grown since you set the limits.
• You have added a teen or young driver to the policy.
• You drive a lot, or carry passengers often.

The extra cost of higher limits varies by insurer, so ask for quotes at several limit levels to see what each step up costs. If you have significant assets, ask about an umbrella policy, which adds liability coverage above your auto and home policies.

At the same time, check your uninsured motorist coverage. With 33.4% of drivers uninsured or underinsured in 2023, according to the Insurance Research Council, this coverage protects you when the other driver cannot pay.

Life events checklist

Yearly car insurance review in eight steps

1. Read your renewal declarations page. Check every driver, car, address, coverage, limit, deductible and discount.
2. Correct any errors. Wrong mileage, garaging address, birth dates or car details can change your price.
3. Check each car's value. Apply the rule of thumb to decide whether collision and comprehensive still make sense.
4. Review your deductibles. Raise them if your emergency savings have grown, or lower them if your savings have shrunk.
5. Look for duplicate extras. Compare roadside, rental and gap cover with what you have elsewhere.
6. Test your liability limits. Compare them with what you own and earn, and get prices for higher limits and an umbrella policy.
7. Confirm every discount. Ask your insurer which discounts you are missing.
8. Compare quotes for the updated coverage. Take your revised coverage to other insurers. See shopping at renewal.

Our coverage checklist walks through these choices one at a time, and our saving money hub puts all the strategies in order.