Deciding how much insurance you actually need for your vehicle can be challenging. While most states only require liability insurance for legal purposes, there are a number of reasons why you may want to consider upgrading to full coverage car insurance, which includes collision and comprehensive insurance as well.

Just so you have a better idea of what you are buying when you pay for full coverage insurance, let’s take a closer look at the different types of insurance. Liability insurance is the most basic type of car insurance. This type of insurance kicks in when you cause an accident. It pays to repair any damage done to another person’s vehicle or property, and can also cover any accident-related medical expenses.

As you might guess, collision insurance covers any damage that is the direct result of a collision between your car and another object. This could be another car, a building, the side of a bridge or any other objects that your car runs into. Even if your car is parked, but is hit by another vehicle, it falls under the collision category.

Comprehensive coverage, on the other hand, covers any other damage that is done to your vehicle as a result of events like floods, fires or wind storms, vandalism or theft.

When you carry all three types of insurance, it is generally considered to be full coverage car insurance. While there are other types of insurance you can purchase, having all three of these major types is generally enough to provide adequate financial protection for any accidents that may occur.

In some cases, however, carrying this much insurance may be overkill. There are certain times where downgrading your insurance plan to just basic liability insurance makes sense.

One of the most common situations where people choose to do so is when their vehicle starts to get old and loses its value. In some cases, it simply isn’t worth paying the extra money for collision and comprehensive insurance for an older vehicle. Ask yourself how much you would be willing to pay for a major repair on your current vehicle before you deciding to just replace it instead. If the amount is less than your current deductible, chances are you would be better off dropping to just liability insurance. This could save you hundreds of dollars, which you could start saving toward buying a new vehicle if anything were to happen to your current car.