Liability-Only or Full Coverage? The 10% Rule

Nationally, full coverage averages $208/month against $63/month for state-minimum liability — a gap of roughly $1,740 a year. Whether that gap buys anything useful depends on one number: what your car is worth.

The 10% rule

If a year of the full-coverage premium gap exceeds about 10% of your car's market value, full coverage is probably a bad bet — the most collision and comprehensive can ever pay out is the car's value, minus your deductible. A $4,000 car 'protected' by $1,200/year of extra premium and a $1,000 deductible is barely insured at all: you're paying a third of the car's value annually to protect two-thirds of it.

Three exceptions

• **A financed or leased car:** the lender requires full coverage; no choice to make.
• **You can't absorb losing the car:** if a totaled car means you can't get to work and can't buy a replacement, insurance is doing its real job — protecting you from ruin, not maximizing expected value.
• **Comprehensive-heavy risk:** hail country, deer country, high-theft areas — comprehensive alone (often cheap) can be worth keeping even when collision isn't.

One warning the other direction: state-minimum liability limits are dangerously low in many states — raising liability limits is cheap and protects your savings from an at-fault lawsuit. The smart middle is often high liability + no collision on an old car. Check your state's numbers for both coverage levels.