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  • If you own a car, it is essential to carry liability insurance on that vehicle, but collision coverage is another story. While collision coverage is an essential part of the package when your car is new, there are a number of factors to consider when deciding whether or not to retain such coverage on an older vehicle.

    Consider the Value of Your Car

    If the value of your car is below $3,000 it may be best to forgo collision coverage. When deciding whether or not to retain collision coverage on an older vehicle, it is important to keep in mind that your insurance company will only pay you the true value of your car in the event of an accident that results in a total loss. No matter how much your car is worth to you, in the eyes of the car insurance company, it is only worth what the Kelley Blue Book says it is worth.

    Can You Afford to Replace Your Car?

    No matter what the vehicle value guides say your car is worth, if you do not have the funds on hand to replace it in the event of an accident, you should think long and hard before dropping collision coverage. This is even more important if your car is your sole means of transportation to your job; in that case, losing the use of your car could also mean losing your job. One of the best ways to approach this sticky problem is to find out how much dropping your collision insurance will save you on your premiums, and put that money away month after month. Depending on the cost savings, you may be able to build up a fund that will help you purchase another car if yours is involved in an accident. And if you remain accident-free, you can always use the funds to finance the purchase of a new car down the road.

    Know Your Options

    Before you consider dropping the collision insurance on your vehicle, it is important to run the numbers. Start by pulling out a copy of your most recent car insurance statement. That statement should break out how much each part of your policy, including your collision coverage, costs you. If you do not have a copy of your statement handy, call your car insurance company and ask how much you can save by dropping your collision coverage. After you know the possible savings, it will be much easier to decide whether or not it makes sense to keep carrying collision insurance on your old car.

    Source:

    Saving money on car insurance

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