Is the annual insurance cost for my collision coverage more than ten percent of my car's value?
When you have an accident and your car is considered a total loss, your insurance company will pay the book value of your car minus your deductible.  The older your car is, the more it's value will have gone down and the less you will receive in the event of a total loss.  If you total your car, and what you receive from your insurance company isn't worth what you paid over the last year to have collision coverage, you might have done well to opt away from collision coverage altogether.

Do I have an outstanding loan on my car?
If the answer is yes, you will most likely have to keep collision coverage in your policy.  Most all loan providers require collision coverage.
 
Do I have to the money to repair my car myself?
If you choose not to have collision coverage, you have to be prepared to pay the damages from an accident on your own.  If the answer to this question is no, you should probably keep your collision coverage.

If my car is totaled, can I start over?
I have a 2006 Ford Taurus.  In excellent condition, Kelley Blue Book rates my trade-in value at $4043.  I purchased my car, with the help of a loan, in September of 2012.  I paid (and am still paying) $7000 for it.  If I were to total my car tomorrow (based on the equation: $ back = Book Value - Deductible), I would receive somewhere around 3500 for it.  If it were up to me, I would keep collision coverage because even though I couldn't put it toward the exact same car, I could put it toward my next car.  But as I said earlier, I have an outstanding loan on my car.  Regardless, I am required to have collision coverage on it. 

On the other hand, my fiance has a 1997 Nissan Altima.  In excellent condition, Kelley Blue Book rates trade-in value at $1026.  Let it be known that his car is by no means in excellent condition, although it faithfully gets us from A to B.  We opted out of collision coverage for his car because it would not be worth it in the least bit.  Its condition puts it at no more $700 value, and with a $500 deductible, we are looking at about $200 back (if even that) if he were to total that car tomorrow.  We could afford to start over after totaling his car, and we saved money when we dropped the collision coverage on the policy. 

A helpful hint for someone who is thinking about dropping collision coverage: if you decide to, keep a savings account designed just for accidents so you always have a little cushion to fall back on without your collision coverage. 


These questions should be discussed with an insurance professional if you are considering dropping collision coverage. 

Email questions@clhins.com or call our office today to talk to someone about the advantages and risks of dropping the collision coverage from your auto policy.









Posted by Melissa Caratachea
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