ASK KIM
When to Trim Your Auto Insurance Coverage
by Kimberly Lankford

I own a 1999 Mustang convertible worth about $10,000. I pay about $900 per year for collision and comprehensive insurance. When should I drop back to just liability?

The Insurance Information Institute suggests that you consider dropping collision and comprehensive coverage when your car is worth less than 10 times your annual premium. You're close to that tipping point.

The key is whether you can afford to fix or replace the car if it is damaged and you don't have collision coverage. "If you’re Donald Trump, you're not going to worry about what it costs to fix," says Bill Wilson, an insurance agent in Hendersonville, Tenn. But for most of us, a high repair bill could bust the budget.

As a compromise, consider raising your deductible to, say, $1,000. That can slash your premium but still protect you financially. If you reduce or drop your coverage, earmark the money you save on your premium for a fund that will help cover the cost of any uninsured damage -– or help pay for a new car when you retire the Mustang.

See Best Bets for Emergency Funds for some good places to keep the money to cover potential repair bills and other emergency expenses.

For help figuring out the current market value of your car -- which is close to the maximum amount that most insurance companies will pay you if your car is totaled -- check out the used car prices at Kelley Blue Book.