Do older cars need collision coverage?
You may choose to not repair a mechanical problem or major body damage if your car has little resale value.
Let’s say the new-car smell wore off years ago, and the air freshener mimicking the scent can’t hide the stinky fact that your car’s best years are in the rearview mirror. You’ve always had full coverage, and that made sense then – but does it make sense now? Like so many things in life, the answer to that question is: It depends.
Your insurance company will only pay what your car is worth in today’s market. The decision on whether to keep comprehensive and collision coverage depends upon the car’s value. So, you have to do the math. A general guideline is that when auto insurance premiums reach 10 percent or more of what the possible claims payout would be, then it’s time to consider dropping comprehensive and/or collision coverage. But proceed with caution!
First, know the differences between the two coverages. Collision is self-explanatory; it’s for physical damage to the car caused by colliding with something. Comprehensive is for everything else, such as fire, theft, hail damage, vandalism, a broken windshield, a giant tree limb falling on your car – even flood damage. With a list like that, you can see that comprehensive coverage is worth keeping, for many reasons. Collision covers the dents in the fender – and worse. But if you wouldn’t repair a mechanical problem or major body damage because the car has little resale value, then you may want to drop the coverage. Again, the big caution is to first ask yourself what makes economic sense for your personal situation.
Don’t risk saving money on auto insurance today if there’s a good chance it will cost you more than you can afford down the road. In other words, choosing the lowest cost option could be costly! Do the math and consider what you gain by having better coverage, rather than what you may save by playing the odds that you could be untouchable on the highway and “unsuable” in court.
This post filed under: Auto