At what point you should drop comprehensive insurance in Australia is a financial decision based on your car value, ability to self-insure, and risk tolerance. As a general rule, many financial advisers suggest considering dropping comprehensive and switching to Third Party Property Damage only when your car's market value falls below $5,000 to $8,000 and you could afford to replace it or live without it if it was written off or stolen. For example, if your car is worth $4,000 and comprehensive costs $900 per year plus $700 excess, you are paying 22% of the car's value per year in premium alone, which may not be worth it, while Third Party Property Damage might cost $300 per year and still cover you for damage you cause to a $100,000 Mercedes or building. You should consider dropping comprehensive when the annual premium plus excess is more than 30% to 40% of the car's market value, when you have no car loan requiring comprehensive, when you have emergency savings to replace the car, and when you park securely reducing theft risk. However, you should not drop comprehensive if you could not afford to replace your car out of pocket, if you rely on your car for work and could not afford downtime, or if you live in a high-theft or high-storm area where total loss risk is higher. Even for cheap cars, keep at least Third Party Property Damage, which is $300 to $600 per year, because without it you are liable for damage to others. Some drivers keep comprehensive until car value drops below $3,000.
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