Factors to consider while choosing or dropping collision coverage

In our previous article, we have already discussed stuffs that collision coverage insure and reasons to avail it. Apart from the benefits that collision coverage impart, there are a few very important factors to keep in mind while choosing or dropping collision coverage for your car. Value of your vehicle

1. If your vehicle’s market value is only few thousand dollars, or less; it makes sense to pay for any damage out of pocket, than go on paying your insurer for an indefinite period and waiting for an accident to take place.
2. If your vehicle costs $5,000 or $10,000, or more, it’s wise to get collision coverage.
3. If there is a loan on your vehicle, your lender might ask you to get collision coverage. However, some states and lenders might not do the same. Without collision coverage, if you damage or total the vehicle, you’ll be left paying the full loan amount without any option to recoup any amount from the vehicle.
4. If you avail collision coverage, during the tenure of five to six years or less, you’ll end up paying your insurer a sum that is more than the cost of your vehicle.

Depreciation value of your vehicle

1. If your vehicle’s worth is $10,000 now, it’ll be anywhere between $4,000 to $6,000, or less than that, in four to five years. You can drop collision coverage after two or three years from the date of purchase if you believe it won’t worth more than $1,000 by that time.

Risks of accident

1. If you hardly drive or scale fewer than a thousand miles a year, your chances of getting involved in an accident are really low.
2. If you drive frequently and often part in urban areas, you may be at higher risk of an accident. You could do some basic maths to find out if collision coverage is really a financially viable option for you. Check the following steps for some guidance:

Find out your vehicle’s current market value by comparing similar models in websites like Craigslist, Ebay Motors, KBB.com, nada.com, autotrader.com, etc,.

• Get yearly quotes from different insurers for collision coverage against your vehicle.
• After a certain period (often 4-5 years), you should consider canceling your collision coverage.
• It’s wise to keep aside a vehicle emergency fund of $1,000 or more than making non-refundable payments towards insurance company for years.

“...if the damage is minimal and your vehicle is relatively aged, it is wise to simply overlook the damages instead of making expensive repairs.”

If you have sufficient balance in your savings account that can be used to repair the damages in case you get involved in an accident, you should drop your collision coverage and consolidate on the savings. If you already have a budget for damages to your car, you can use that in the event of an accident. However, if the damage is minimal and your vehicle is relatively aged, it is wise to simply overlook the damages instead of making expensive repairs. In the end, there might be many factors that weigh into your decision as to whether to keep or drop collision coverage from your policy or not. If you’re not absolutely sure, get in touch with a local insurance advisor. Anyhow, if your vehicle is brand new, it’s best to take some additional caution and pay the extra cash towards collision coverage.