A lot of people will instantly cancel their collision coverage on their vehicle once they make the last payment and are no longer legally required to carry the coverage. There are times when this idea is fine, but there are also times when this is probably not a good idea. Before you rush to call your insurance company to cancel the coverage, you may want to think about the following things first.
The purpose of collision coverage and how it works
Collision coverage is always required when you have a loan on a car, but it is always a type of coverage you can have even if you do not have a loan. The benefit of having it is that it covers the costs of repairs to your own car no matter what. If you do something that leads to an accident, having collision coverage is the only protection you have for your vehicle. Having collision coverage is great to have in these types of situations, and that is why it is not something you should just automatically drop after paying off your car.
The value of your car
Instead, you should think about this decision first, and a good place to start is by determining the value of your car. You can look this up online if you want, as there are many websites that will tell you a car's current value, and this will help you decide. If your car is worth a lot of money and you have no collision coverage, you would lose the value of this car if you caused an accident. You will need to think about how this would affect you if it happened. If you would suffer severe financial distress from this, it would be a lot better to keep the collision coverage on the car, even after paying it off. If your finances would not suffer from this type of incident, then having collision coverage might not be as important for you.
The difference in costs for having collision coverage and not having it
You will definitely see a difference in costs if you drop your collision coverage, but is this cost difference really worth the risks you will have if you no longer carry collision coverage? This is vital to think about before dropping the coverage.
If you would like to learn more about collision coverage and other options, you can do so by calling an auto insurance agency today.Share