If you’re assessing your household budget, you may be wondering if you really need all this auto insurance coverage. Is it possible you have too much coverage based on your individual needs and the age of your vehicle? But just when should you drop collision coverage on your auto insurance?
First, make sure you have the minimum amount of liability insurance required by the state of South Carolina. Also, if you are still financing your vehicle through a bank loan or through the car manufacturer, you may be required to carry additional liability and comprehensive insurance.
Once you’ve established you have the required insurance, you can look at any additional coverage to determine if this is a good time to drop collision insurance.
Collision coverage pays for the physical damage to your car as a result of a collision with another car as well other objects like a tree. Collison insurance is not required under South Carolina law. Certainly, though, this form of insurance is handy in the case of an accident, but in some situations, it may not be worth the added premiums or the cost of a deductible.
Here are some considerations when deciding if you should drop your collision coverage:
What’s the value of your vehicle? If you have an older car (more than 7 years old) with a lower market value, you may be fine to forego collision coverage. The cost of repairs could easily exceed the car’s value. And, even if the car is totaled, you may be better off to drop the collision coverage and save on the premiums. Consult Kelley Blue Book or Edmunds.com for an estimated value of your car if you were to sell it or trade it in on a new car.
A good rule of thumb in this situation it to calculate when the replacement value of your vehicle is less than 10 times the annual premium you’re paying for collision insurance. For example, if your car is valued at $2,000 and you pay $240 or more each year for collision coverage, it could be time to drop that additional collision insurance.
Who’s on your policy? Teenage drivers are more likely to be involved in motor vehicle accidents, especially in their first year of driving. So if you have a driver between 15 and 20 years old in your household and on your insurance policy, you may want to hang on to that collision coverage. Even if you teen isn’t involved in a car wreck with another vehicle, they may be more likely to back into a tree, the garage door or a telephone pole.
What’s your risk tolerance? Some people are simply more willing to take a chance and trust they won’t need extra collision insurance. Others are more risk adverse and appreciate the comfort of knowing they have all the insurance coverage they might need. In this case, it comes down to personal preference.
Before you completely drop your collision insurance, do some price comparisons. Another company may offer a better deal on auto insurance overall. It pays to shop annually for car insurance anyway so use this as an opportunity to get quotes from three or four other companies – even if it’s just a search online to give you a sense of what’s out there. That way you’ll go into your decision to drop your collision auto insurance with all the facts and information.
Learn more about Manning Insurance Services‘ Car Insurance Policies.