Drivers who have collision coverage pay a set monthly rate for an insurance that pays for damages to their vehicles when they strike, or are hit by, other vehicles or objects. When involved in an accident that damages a vehicle, a driver will pay his or her set deductible first, and if he or she has collision auto insurance, the agency that the policy is with will pay for repairs to the vehicle. However, this type of optional insurance only pays for damages to at-fault drivers' vehicles. Mandatory liability insurance covers the other party.
As part of the monthly car insurance payments come from collision coverage, it can be costly over time, and considering that this particular coverage reflects the value of the car, it may be wise to drop collision insurance for old or low value cars. Checking quotes online will reveal the cost for this coverage for certain vehicles. There are also other ways to lower monthly car insurance rates, such as setting high deductibles.
Why Drop Collision Coverage for Old Cars?
This type of insurance is assessed and valued according to the value of the car. For an old car that is not worth a whole lot, the maximum payout by the agency is approximately the value of the vehicle, minus the deductible that the driver pays first. For old cars, paying monthly rates to cover repairs after collisions is likely more costly for drivers than foregoing the insurance in the first place. So, for drivers of older, or low valued cars, looking into dropping collision coverage may be time well spent.
Example of an Old Car and Collision Auto Insurance
Supposing that a particular 1987 Honda Civic is valued at $700, if an accident should occur that damages the car severely or even totals it, the maximum payout that the owner would usually receive would be $700 minus the set deductible. So, if a car valued at $700 is involved in a collision that presents over $700 worth of damage (or totals the vehicle), and the driver has a deductible of $400, then the maximum payout for collision auto insurance from the agency would be $300.
However, if rates for this type of coverage were up to, or over $30 dollars a month, then after ten months, the coverage would be more costly for this old vehicle than it is worth (as eleven months of coverage would cost $330 at $30 a month, but as the car is valued at $700, and the first $400 for repairs would come from the deductible, only $300 would be issued by the insurance company). This all could have been handled by the client for less money had he or she not received ten months or more of collision coverage.
When to Use Collision Auto Insurance
For cars that have significant values, it is certainly worth using this type of coverage, as well as other precautionary insurances, such as comprehensive coverage. This is because the rates are much lower than the payout would be in the case of a major collision. It may also be worth it to set a high deductible for nice cars. The best thing to do is to talk to agents about what aspects of particular policies are best, as they have expertise, and are there to help.
Although collision car insurance does pay for repairs after the deductible has been paid in cases of collisions, the payouts issued by insurers directly reflects the values of the vehicles covered. Therefore, for low valued vehicles, monthly payments for this type of coverage are likely more costly than they are worth.
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