Dropping Collision from Your Auto Coverage

Regardless of how safe and careful you are as a driver, the odds are good that you will be in an auto accident, on average, once every ten years. People who drive in large, urban areas or late at night face greater risks of being in accidents, but the nationwide average is once every ten years. That means you need to make sure you have the right kind of coverage to protect your interests if and when an accident occurs.

Difference Between Comprehensive and Collision Insurance

Comprehensive coverage refers to damage done to your vehicle by something other than a collision. This includes things like:

• Tree limbs falling onto your vehicle.




• Hail damage.




• Vandalism.




• Theft.




• Civil unrest.




• Hitting a deer.




• When someone breaks a window or windshield to steal items from inside your vehicle.

Collision coverage applies to damage resulting from a collision. This includes things like:

• Swerving on the road and running into a tree.




• When another car backs into your vehicle.

Depending on the terms of your policy, collision coverage can be used to pay for repairs to your vehicle when another driver is at fault but is slow to pay. In these instances, your insurance will cover the cost of repairs and then seek reimbursement from the other driver’s insurer.

When Collision Coverage Makes Sense

Collision coverage not only makes sense but is critical, for some people. These instances include:

• When you are leasing your car or paying a car loan. It is likely part of your lease or loan agreement and a requirement that you keep full coverage on your car for the duration of the lease or loan.




• If you are concerned about being hit by an uninsured driver. If you are involved in a collision with an uninsured driver, you will be on the hook to pay for the repairs to your vehicle yourself if you do not have collision coverage.




• If you have only one vehicle. If you rely on a single vehicle to get to and from work, school, and other activities each day, collision insurance is a must. It is important because you probably rely on that car daily and may not be able to wait for the other driver’s insurance company to finally authorize payment so you can repair your car.

Times when Dropping Collision is Appropriate

People with newer cars often keep collision coverage to protect their investments – even if your car loan is paid off. That does not mean it is always in your best financial interests to do so.

There are occasions when it might not be as financially beneficial to have collision insurance, like in these instances:

• Your vehicle is ten years old. One general rule of thumb is to skip collision coverage for vehicles that are more than ten years old.




• Your collision premiums and your deductible are more than 10 percent of your vehicle’s blue book value. Another rule of thumb is to consider the Actual Cash Value (some might call it the “Blue Book” value) of your car vs. your collision premiums plus your deductible. If the combined cost is greater than 10 percent of your vehicle’s value it might be in your best interest, financially speaking, to skip the collision coverage.

That said, not everyone can afford to go without insurance coverage even when these rules apply. There are no hard and fast rules; that is why it is best to work closely with a trusted insurance agent to determine what your needs are when it comes to auto insurance protection. After all, insurance is about protecting your financial interests.