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Should You Drop Comp/Coll Coverage?
By: Jaci Buscher | Date April 16, 2014
We have been getting many questions here at the office about the appropriate time to drop comprehensive and collision coverage on older vehicles. As a refresher, collision coverage insures your vehicle in the case that it is damaged in an accident with a vehicle, building, person, tree, etc. Comprehensive coverage insures your vehicle when it is damaged by anything other than an accident. For example, comprehensive covers hail damage as well as a broken window caused by the neighbor kids playing baseball in your cul-de-sac. We would recommend that all new cars have these coverages and it is usually mandatory that all financed and leased vehicles have comprehensive and collision coverage. However, for older vehicles that are completely paid off, there is a large gray area between whether or not these coverages are necessary. When making this decision, a couple important factors must be taken into account.

First, it is important to have an accurate idea of how much your vehicle is actually worth. This can be done by using online actual cash value (ACV) estimator tools such as N.A.D.A. Guides or Kelley Blue Book. All you have to do is answer questions about the year, make, model, features, and condition of your vehicle and the database will tell you an approximate cash value of your car. If you have added custom parts or equipment such as high end wheels or an after-market stereo system, this ACV will not include that value and your insurance may not cover them either, unless you have purchased additional coverage.

Once you have the ACV for your vehicle, you will want to compare it to the amount you are paying for comprehensive and collision coverage and the amount of each deductible. For example, if your vehicle's ACV is $2,500 and you are paying a premium of $500 per year for comprehensive and collision, you're paying 20% of your vehicle's value to protect your vehicle from damage that might never actually happen. Furthermore, if you have a $500 deductible, you will still have to pay $500 on top of the premium you already paid, if your vehicle is damaged. Therefore, you would really be paying $1,000, in total, in order to get your $2,500 vehicle repaired. Now, whether or not to go ahead and continue purchasing this coverage is your decision and varies by situation.

One of these situational factors is how much you can actually afford to pay out of pocket in the case of an accident. If there is no way you can pay more than $500 at one time to fix your vehicle, keeping the coverage with a $500 deductible would be a good option for you. However, if you believe that you have the ability to pay more than this, you may want to consider removing comprehensive and collision and accepting the additional risk. In this case, you could think about adding uninsured motorist property damage (UMPD). This will cover the damage caused when someone else is at fault, but not insured. Clearly, it all depends on the individual and how much risk they are comfortable accepting.

Finally, some companies bundle additional service options with comprehensive and collision coverage and removing these coverages could result in losing other services. For example, if you do not purchase comprehensive and collision coverage, then you do not have the option to purchase rental reimbursement coverage and some companies will not provide towing. This is just one more factor that must be taken into consideration before dropping the comprehensive and collision coverage. As previously mentioned, it all depends on each individual's situation. Feel free to contact us if you would like to discuss your specific situation.