When To Drop Collision And Comprehensive Insurance

If you own a car, you are obligated to purchase certain types of auto insurance coverage. You’ll need to get a combination of liability auto insurance, uninsured motorist coverage, and maybe personal injury protection, depending on your state.

Although collision and comprehensive coverage are not required in every state, they are important insurance categories that should not be disregarded. They’re almost certainly required if you have a car loan or lease. This is primarily for the lender’s or leasing company’s protection.

Collision insurance covers damage to your car caused by a collision with an object, such as a pole, guard rail, or tree.

Comprehensive coverage isn’t quite “all-inclusive,” but it does cover car theft and damage caused by weather, floods, fire, vandalism, animal collisions, and falling objects such as tree branches, among other things.

“They’re frightened you won’t fix the car,” says Eric Poe, Cure Insurance’s Chief Operating Officer. In the unfortunate event of a collision that bends the automobile frame, for example, Poe believes the insurer will most certainly deem the vehicle a total loss. As a result, the lender will expect you to repay the loan sum. Rather than allowing the consumer to walk away from the unpaid loan, the insurance reimbursement goes to the lienholder.

When you rent a car or truck from a dealer, you usually need full coverage auto insurance, which includes coverage for both collision and comprehensive damage.

“If a car is leased or a loan isn’t paid off, you can’t cancel this coverage,” explains Amy Bach, Executive Director of United Policyholders, an insurance advocacy group.

And if you own a new or almost new automobile outright and have the financial means to replace it if necessary, collision and comprehensive coverage may not be necessary. This can save you hundreds of dollars every year on your total vehicle insurance premiums.

It’s possible that the value of your vehicle isn’t what you think it is.

Calculating the cost of dropping collision and comprehensive insurance requires determining the value of your vehicle, not as you perceive it, but as the insurer sees it. If the automobile or truck is totaled in an accident, the insurer will compensate for the actual cash value of the vehicle, which is usually the wholesale price at auction rather than the sticker price on the dealer’s lot.

Cure’s Poe says that these prices are usually a lot lower than the prices listed on Edmunds and NADA Guides for used cars.

Calculating the Deductible

Car owners must also factor in the possibility of insurance payment for a collision or comprehensive claim. Both of these coverage types have deductibles, which reduce the amount of any insurance claim check. It might cost thousands of dollars if you choose a high deductible when purchasing coverage. On a $5,000 total loss car, a $2,000 deductible is only $3,000.
You can choose a much lower deductible, like $250 or even nothing at all, but your rates will go up.

Choosing to Discontinue

The conventional rule of thumb used to be that collision and comprehensive insurance should be discontinued when a car is five or six years old, or when the mileage hits 100,000 miles.
However, it now relies on the car’s worth and replacement parts. A Mercedes, for example, maybe worth the cost of collision and comprehensive coverage for several years longer than a Nissan Sentra. Furthermore, replacing parts may be so costly that they quickly exceed the deductible.

Older automobiles, which are still usable but have lost a significant portion of their worth due to depreciation, have their calculation. It makes sense to drop one or both of these coverages when insuring these automobiles. That’s because your maximum payout, which is the value of the car minus your deductible, will almost certainly not be enough to cover the cost of the insurance over time.
Classic and vintage vehicle owners must make special considerations. Owners of historic vehicles commonly get classic car insurance. Instead of depreciation, these policies are based on the car’s “agreed value.” Loretta Worters, vice president of the Insurance Information Institute, says that this could depend on the condition of the car or the cost of the special-order parts that are needed to fix it.

What if you only dropped one?

So, given the cost of collision and comprehensive insurance, as well as the potential payments, would it make sense to keep one and drop the other at some time, and can you do so?

Yes and yes, respectively. Poe and Worters both agree that comprehensive insurance is a better value for the money than collision coverage, even though insurers typically sell both together and drivers of older cars frequently drop both at the same time.

Bet on Yourself to Drive Safely

“Bet on yourself to be a safe driver,” Poe says when considering auto insurance coverage, noting that “95 percent of all drivers haven’t had an at-fault collision in three years.” This makes it less likely that you’ll need collision insurance, which pays to fix your car if it hits a building, a tree, or another car.

Comprehensive insurance, on the other hand, covers a wide range of issues that don’t usually involve your driving, such as fire and roof-crushing tree branches.

Hail storms are a common hazard, particularly to car windshields, which are also vulnerable to road trash picked up and flung by car and truck tyres. As a safety measure, certain jurisdictions now mandate insurers to repair windshields at no cost to the automobile owner, provided the vehicle has comprehensive coverage. Other common risks include car theft, as well as theft of pricey parts like airbags, which are standard on all current cars.

There’s also the possibility of a natural disaster. When Superstorm Sandy flooded the New Jersey and New York coastlines in 2012, an estimated 250,000 people lost their cars.

It all boils down to peace of mind, as it does with most types of insurance.

Bach advises reducing comprehensive and accident coverage.

What if I intend to keep my car for an extended period?

Car owners who value durability and dependability typically seek to keep their vehicles in good working order for as long as possible. According to a poll conducted by iSeeCars.com, more than 14% of Toyota Prius owners use their vehicles for 15 years or more. The study looked at over 660,000 cars from 1981 to 2005 to examine which kind of vehicles were most likely to be kept for at least 15 years by their original owners.

Consider the cost of collision and comprehensive insurance over a number of years versus your maximum insurance payment if you plan to keep your vehicle on the road for more than a decade (the value of the vehicle minus your deductible). It’s usually not worth it to obtain collision and comprehensive coverage when your bill over five years exceeds what your insurer may pay out.

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