3 Situations Telling You To Stop Paying For Collision Insurance
The one thing that you really need in the way of insurance to be able to drive is liability insurance. This is the insurance coverage to protect the other drivers on the street and their property in the event that you cause an accident.
Another main category of insurance that is available is collision insurance, which is what covers the damages to your automobile in the event of anyone causing an accident. Collision insurance is not mandatory to drive, but there are certain circumstances in which you will have to carry collision insurance. If you have to have collision insurance on your automobile, you will be notified.
If you don’t have to have it though, dropping this coverage is a good way to save money in your budget. Here are the 3 things that may be telling you that it is a good time to stop paying for that collision insurance.
Situation One: You Can’t Afford The Coverage
Living on a tight budget and having to cut back where ever you can is becoming the norm for most in the last handful of years. If you find yourself in this situation and have to cut expenses, stopping the collision insurance on your automobile may be something that you want to consider. You will be able to save some money by not having the coverage to pay for and you will still be able to use your car.
Situation Two: You No Longer Have A Lienholder
Really the only circumstance that you would have to carry collision insurance on your vehicle is if you are making payments on it to a lienholder. A lienholder is the lease company or the business that loaned you the money to be able to purchase your car in the first place. They are the ones that you are now making monthly payments to.
Lienholders require that you purchase collision (and comprehensive) insurance on your automobile to protect their property. Until you satisfy your loan or lease with them, they actually own the vehicle and don’t want it damaged.
Once a lienholder no longer has an interest in a vehicle though, they can no longer make it a requirement for you to have collision coverage on the automobile. If you are looking to save some money by cancelling your collision coverage, you are free to do so now.
Situation Three: You Have An Older Model Vehicle
If your vehicle is an older year or is just in pretty bad condition, having collision coverage on your vehicle may be costing you more than just paying for any damages. If you were in a car accident and totaled your vehicle, your insurance company is only going to pay up to the value of the vehicle.
This could mean that you are paying out more in collision insurance premium than the insurance company will ever pay out for your vehicle. In this case, you would be financially better off to just cancel the collision coverage and put the money you are saving each month away.
If you put it into a separate bank account and do not touch it, you will have that money for any damages done to your vehicle. You are also going to be earning interest on the money which is much better than just giving it to the insurance company for them to make more money off it.
The Consequences
While cancelling your collision coverage is a quick money saving fix, you may have to pay for it later down the road.
If you were to ever cause a car accident and there were damages to your vehicle, your collision coverage would have been what paid to repair the damages (after your deductible). If you cancelled your collision coverage prior to the accident, the insurance company no longer has a responsibility to pay these damages for you. You will then have to pay for it out of your own pocket which may take away any money saving benefit.
Todd Clay was an agent for the largest insurance company in the US. He now researches and blogs about collision insurance with the consumer in mind. Check out the latest reviews, rates by state, or grab a few auto insurance quotes in 5 minutes at: www.CarInsuranceGuidebook.com