In the case of an accident, whether car versus car or car versus object, collision insurance kicks in to cover repairs or pay out the replacement value of your car. Collision car insurance does not always make financial sense, though. Answer the following questions to determine if it’s necessary for your situation. If you decide you need it, or simply want to shop for better rates on insurance you already have, DexKnows listings can connect you with an agent.
Do you have an outstanding car loan?
If you still owe money to a lender, it will require you to maintain collision insurance until the debt is paid in full. Do not cancel that part of your policy, as the lender could repossess the car or impose costly penalties as a result.
What is the value of your car?
Once you owe nothing on your car and have the freedom to cancel collision insurance, consider the value of your car before making a decision. For example, if the value is only $3,000, and your deductible and monthly payments for one year cost more combined, it does not make financial sense to continue this part of your policy.
If, on the other hand, the math shows that the value of your car far exceeds the cost of your policy for a year, as well as the deductible if needed, collision car insurance makes financial sense.
Do you use your car year-round?
Lack of use is another reason to consider canceling collision car insurance coverage. If, for example, you plan to be out of the country for an extended period of time, cancel that portion of your policy because your car won’t get into a collision parked in your garage or driveway. Snowbirds who spend part of the year in warmer areas of the country often cancel collision insurance on the car they leave behind.
Another way to save on car insurance
Also look at the liability coverage levels on your current policy to ensure you aren’t overspending. This type of coverage pays for damages due to bodily injury and property damages to others for which you are responsible. It also pays for defense and court costs if you get sued. Your state requires minimum coverage, and it might not make financial sense to have more if you do not have extensive assets. A college student, for example, typically would not need the same level of liability coverage as an older person who owns property and has significant savings that could be used to pay for damages.
For more information about this important area of car insurance coverage, consult an insurance agent. DexKnows listings can connect you with one in your area.