Dropping collision coverage

Question:Bill has been driving an old car for the last five years and has never received any tickets or collided with another car or had an accident, nor has he paid any fines for the car. He plans to drop insurance coverage and would like to know if he can drop collision coverage.

Answer:Collision coverage is meant to cover you when your car gets involved in an accident and hurts itself. However, in general such coverage provides limited protection. Many individuals drop collision coverage in order to cut down on your auto insurance and save some money. But, before you drop any coverage consider the aspects whether it will really help you save money or will it cost you more.

You can drop collision coverage:

*    When your car is 5 years old or older than that.
*    If the annual fee for collision coverage is 10% or more than the car's value.
*    If you have a safe driving record for at least 5 years.
*    If you have the money you may need when your car gets involved in an  accident and needs repair works.
      
Having said that I would also advice you to carefully consider certain points before you can drop coverage. Calculate how much your collision coverage is costing you and how much your car is actually worth. You may use the Kelly Blue Book to check on the value of your car. Most insurers generally depend on the Kelly Blue Book. Determine how much you can get from the insurance company if you make a claim for collision coverage minus the deductibles. If you see that your insurance premium is 10% or more you may consider dropping collision coverage.

The nest thing that you may need to consider is, even if your insurance premiums cost you more than the car's value, you may want to keep it. However, if you do have the funds ready to get your car repaired in case of any damage from an accident, you may easily drop coverage. Again, if you have a loan on your car you may not be able to drop this coverage. Auto insurance companies usually want borrowers to have this protection even if you are a very careful driver.

So, Bill, having considered all the above mentioned points, you may then decide whether or not to drop your coverage. Just the car being 5 years old must not be a reason to terminate coverage.