What does Dave Ramsey say about comprehensive insurance?

[IanFitz]

Dave Ramsey advises that you should drop comprehensive and collision coverage on an older car to save money, specifically when the vehicle's value is low relative to the annual premium cost. His rule of thumb is to consider removing this "full coverage" when the combined annual premium exceeds 10% of the car's current market value. This is a pragmatic, math-driven approach to auto insurance aimed at freeing up cash flow for more important financial goals like debt repayment and investing.

Ramsey's stance is rooted in the principle of self-insuring against minor losses. Comprehensive and collision coverages protect your own vehicle from physical damage—comprehensive covers theft, fire, vandalism, and animal strikes, while collision covers accidents involving another vehicle or object. He argues that paying high premiums to an insurance company for a rapidly depreciating asset is often a poor financial move. Instead, the money saved on premiums can be set aside in an emergency fund to cover potential repairs or contribute toward a future car purchase.

To apply his advice, you need to know two key numbers: your car's current private-party market value and the annual cost of your comprehensive and collision coverage (plus your deductible). For example, if your car is worth $4,000 and you're paying $800 a year for these coverages with a $1,000 deductible, you're spending 20% of the car's value annually. Ramsey would say that's too high. The following table illustrates the breaking point for his 10% rule:

Car's Current Market Value	Maximum Annual Premium (Comp + Collision) to Keep Coverage per Ramsey's 10% Rule
$2,000	$200 or less
$5,000	$500 or less
$8,000	$800 or less

It's critical to note that he strongly recommends maintaining high-liability limits—often suggested at 100/300/100 (meaning $100,000 bodily injury per person, $300,000 per accident, and $100,000 for property damage). This protects your wealth if you're at fault in a serious accident. Industry data shows that liability-related claims, especially for medical costs, can easily exceed state minimums and jeopardize personal assets.

His guidance assumes you have the financial discipline to save the premium difference. If dropping coverage would leave you unable to afford a replacement car if yours is totaled, the short-term savings might not be worth the risk. Ultimately, Ramsey views car insurance not as a maintenance plan but as a financial safeguard against catastrophic losses you cannot afford to cover yourself.

[McRosalie]

As someone who followed Dave's plan to get out of debt, I looked at my car insurance through that lens. My old sedan was worth maybe $3,500. I was paying over $600 a year just for comp and collision. Doing the math, that was way more than 10% of the car's value. I dropped those coverages and bumped up my liability instead. The savings went straight into my emergency fund. A year later, a minor fender bender happened. I paid the $1,200 repair out of my fund calmly. It was empowering—I stopped over-insuring a depreciating asset and took control of the risk myself.

[OSara]

From my perspective as a financial planner, Ramsey's advice on this is sound for its target audience—people building wealth and eliminating debt. The core financial principle here is optimizing capital allocation. Premiums for physical damage coverage on low-value assets represent a poor expected return. The insurance company's pricing includes their overhead and profit; you're essentially betting against a highly probable event (your car's continued depreciation). The smarter move is to redirect those premium dollars into liabilities with guaranteed, high interest rates (like credit card debt) or into assets that appreciate. The crucial companion step, which we stress to clients, is the simultaneous establishment of a fully funded emergency savings bucket to backstop this decision.

[MacDaniella]

I've handled auto claims for years. Ramsey's 10% rule is a very practical filter. Here's what I see: People often cling to comp and collision on a car worth $5k because they fear a total loss. But if their deductible is $1,000 and the annual premium is $900, they're paying nearly the car's scrap-value difference over a few years. In a total loss scenario, the insurer pays the actual cash value, minus deductible. For an older car, that final check is often surprisingly small and sometimes less than the total premiums paid. The real financial devastation comes from inadequate liability limits if you injure someone. That's where the protection focus should be.

[DeCora]

Let's break this down for a young driver with an older car. Dave says: "Stop overpaying to protect junk." Harsh but true. First, find your car's real cash value on a site like Kelley Blue Book. Second, call your insurer and ask for the exact annual cost of just your comprehensive and collision coverage. Now do the division: (Premium / Car Value). Is it over 0.1? If yes, you're a candidate to drop it. The immediate fear is, "What if I crash tomorrow?" If you can't afford to replace the car at all, keep the coverage a bit longer while you save aggressively. But prioritize raising your liability to 100/300/100—it's usually not much more expensive. This strategy shifts your insurance from being a costly "car warranty" to a true shield for your future income and savings.