The rule of thumb for dropping collision insurance is to drop it when a car’s collision premium, plus the deductible, costs more than 10% of the car’s current value. Some experts also advise dropping collision insurance when the vehicle is more than 10 years old. Since the average driver gets into an accident once every 10 years, these rules exist to keep drivers from paying more for insurance over time than they would get from filing a claim.
However, you should think of these rules as loose guidelines while also taking your individual circumstances into account. For instance, if you cannot afford to replace your car and you need it for transportation, dropping collision insurance could leave you stranded or in debt. Similarly, if you have a history of at-fault accidents, or a teenager is learning to drive using your car, you are particularly likely to need collision insurance. And to calculate your car’s value, it’s important to use a tool like Edmunds or Kelley Blue Book instead of the car’s price when you bought it.
Additionally, not everyone is allowed to drop collision insurance. It’s required for most financed or leased cars, since lenders and lessors want to make sure the car retains its value as collateral. In fact, if you drop required coverage on a financed car, you could end up paying for expensive force-placed insurance or even having the car repossessed.
An older rule recommended that drivers drop collision coverage on a six-year-old car or a car with 100,000 miles, but this is slightly outdated advice given the cost of car repairs today. A more expensive car might be worth plenty even after five years, or a car with 100,000 miles might be too costly for you to repair or replace with your savings. That’s why it’s important to consider your own financial circumstances before deciding whether or not to drop collision insurance.
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