Is it a bad idea to have too much auto insurance?

It can be bad to have too much auto insurance. It certainly is if you own an older vehicle that isn’t worth much money and if repairing it would cost more than the vehicle itself. Being over-insured could also cause your monthly insurance rates to be an unnecessary strain on your wallet. Luckily, you can compare free, tailor-made quotes online to find the best policy for you and your budget.

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Chris Tepedino is a feature writer that has written extensively about auto insurance for numerous websites. He has a college degree in communication from the University of Tennessee and has experience reporting, researching investigative pieces, and crafting detailed, data-driven features. His works have been featured on CB Blog Nation, Flow Words, Healing Law, WIBW Kansas, and ...

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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Reviewed by Rachael Brennan
Licensed Insurance Agent

UPDATED: Aug 30, 2021

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Can't-Miss Facts

  • If you are over-insured, you could be paying too much for auto insurance
  • If you own an older vehicle, you may not need full coverage
  • Shopping online can help you find quotes that fit your needs and budget

As a driver, you’re sure to have asked yourself, “How much auto insurance do I need? How can I lower my monthly auto insurance rates?” at least one time or another when reviewing your auto insurance policy.

While it is very common to hear about the dangers of having too little auto insurance, being over-insured can present a problem for drivers too. If you’re on a budget, for example, being over-insured can take an unnecessarily big bite out of your wallet every month.

It is bad to have too much auto insurance, but auto insurance quotes are easily found online, and you can begin your search for adequate coverage at great prices today.

Now that you know it is bad to have too much auto insurance, enter your ZIP code today to receive free insurance quotes.

What does it mean to be over-insured?

To fit the over-insured definition, you must be insuring your vehicle for more than it’s worth or purchasing more coverage than you could possibly need. It is quite the opposite of being under-insured.

If you have too little insurance and were to be at fault in a major accident that hurt quite a few people, you could find yourself responsible for massive medical bills and be forced to declare bankruptcy.

While it may seem like being over-insured is a good thing, especially in comparison to being under-insured, it has a major downside. Your monthly insurance rates would be far too high, and you would essentially be throwing money away for unnecessary coverage options.

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How can drivers tell if their vehicle is over-insured?

Ascertaining if your vehicle is over-insured, or under-insured for that matter, all comes down to your lifestyle and your budget. For example, some drivers might consider having comprehensive coverage on a 20-year-old vehicle is a perfect example of being over-insured.

But some drivers, on the other hand, could have $800,000 in coverage and still be under-insured. To find out if you’re over-insured or under-insured, consider your lifestyle and budget as you review this list of helpful tips:

  • Determine your state’s minimum insurance requirements
  • Recognize that your state’s limits may not provide you with adequate protection
  • Calculate if you can afford to pay anything extra after the insurance is exhausted
  • Review your policy to see if you need add-ons like towing and roadside assistance
  • Compare free online quotes to see if your premiums are too high

If you have an older vehicle that isn’t worth much money, then you may be able to safely drop full coverage as it can add quite a bit to your monthly bill, and fixing up an older vehicle may not be the most prudent financial decision.

Just look at these full coverage premiums offered in different states to see how much you can save by switching your insurance from full coverage to just liability:

Average Annual Auto Insurance Coverage Rates by State
StatesAverage Annual Liability RatesAverage Annual Collision RatesAverage Annual Comprehensive RatesAverage Annual Full Coverage Rates
District of Columbia$663$471$231$1,364
New Hampshire$406$300$109$816
New Jersey$896$383$127$1,405
New Mexico$510$279$175$964
New York$823$393$169$1,384
North Carolina$359$295$127$781
North Dakota$296$249$237$782
Rhode Island$790$415$131$1,337
South Carolina$554$269$182$1,005
South Dakota$306$215$264$785
U.S. Average$555$326$148$1,030
West Virginia$508$332$204$1,045

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As you can see, average annual full coverage rates will cost you the most. 

What are the consequences of over insurance?

The most glaring consequence of being over-insured is the strain it puts on your bank account, but it can also be a moral hazard. An insurance company could be nervous that an over-insured client would make false claims and could be more hesitant about accepting claims.

It is always best to make sure that your policy is tailored to your specific vehicle, your lifestyle, and your budget.

Having Too Much Auto Insurance: The Bottom Line

Being over-insured could cause your monthly insurance rates to skyrocket and would be an unnecessary strain on your wallet. Luckily, you can compare free, tailor-made quotes online to find the best policy for you.

Now that you know more about if it is bad to have too much auto insurance, enter your ZIP code to receive quotes from insurance companies near you and see how much you can save.

Free Auto Insurance Comparison

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