Your car gets you to where you need to be. It may be getting older, but it runs well. It’s reliable, but you’re starting to wonder about its loss of value. If this is the case, you may be tempted to drop collision coverage from your auto insurance policy. As the vehicle ages, does it make sense to keep collision coverage? You’re not the only one to ask, so here is what you need to know.
What is collision coverage?
Collision auto insurance covers damage to your vehicle caused by contact with another vehicle or object, including rollovers. Your collision coverage in your policy will cover your vehicle regardless of who is at fault for the damage. Whether you hit a tree, collide with a building, or back into another car, this type of coverage can step in to help.
When should I drop collision coverage?
Most insurers recommend dropping your comprehensive coverage when your car’s value diminishes to the point that you cannot buy much coverage. However, you should always consider the effect the complete destruction or disappearance of your vehicle might have. For example, if you use your car daily to get to work, and your financial position would not allow you to purchase a replacement vehicle right away, then keeping coverage could be a wise choice.
If your vehicle is older, it might be time to drop comprehensive and collision coverage and put the money you are saving into an account to buy a new car when your current one can no longer go on.
What can you afford?
Before dropping collision coverage, first decide what you can afford to do. You should imagine what would happen if you were in an accident and your car could not be repaired. If you could afford to go out and buy another vehicle immediately to keep you on the roads, you may want to consider reducing your policy premium by eliminating collision coverage. If replacing your car entirely out of pocket is not possible, then you may find the security of collision coverage is important, especially if you can spread those payments over the course of a year.
Keep in mind that this is unique for each person and situation. For example: If your car is worth $3,000 and you have a $500 deductible, your potential payout would only be $2,500 if your car was totaled and you placed a collision claim. Using the 10 percent rule, if your collision and comprehensive premiums cost $250 or more a year, it is time to consider dropping the coverage.
Too many people drop coverage too early in their vehicle’s life, however. Talk to your insurer about this coverage and ways to save on your auto insurance.
Should the worst happen, you will need car coverage to get back on the road. Contact Action Insurance Group who can help you find reliable insurance for the right price.
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