Purchasing your first car is very exciting step in life and often times you must purchase full coverage insurance because your vehicle is financed.
Now, fast forward 5 years. Your car is paid off and you’re looking at your insurance premium, are you questioning whether is it time to drop your comprehensive and/or collision coverage?
Below is a list of objectives to look at when trying to determine if dropping coverage is for you.
1. Pay attention to your deductible. If you are looking to drop coverage to save money, this could be another option for you.
- The higher your deductible is, the less you will pay in your premiums. On the other hand, raising your deductible will also cause you to pay more in the event of a claim.
- Lowering your deductible will increase your premium. This may cause you to submit more claims because it is low and increase your premium after a claim.
2. Look at the value of your vehicle. When trying to numerically settle this debate, make sure to look at the value of your vehicle from an insurance perspective.
- Most auto policies settle on the actual cash value of the vehicle at the time of loss
- ACV is the present market value of your vehicle dependent on condition and mileage at the time of loss.
3. Also consider the following.
- Dropping coverage depends heavily on the cost to repair and value of the car. A vehicle with a high residual may be worth the extra money in premium.
- It is possible to maintain just comprehensive or collision.
While we don’t want you to ever have to claim damage to your vehicle, we do want to make sure you understand the difference between full coverage and liability. So, the last question you should ask yourself before dropping coverage is, how will you replace your car if you did not purchase coverage? Oftentimes many of our customers maintain full coverage because the cost is not excessive, and coverage would provide a down payment toward their new vehicle.
Protect Yourself with The Coverage You Need