Used Vehicle Auto Insurance – Do I Need Collision Insurance?

Used vehicles are ideal for many reasons. One reason people prefer used vehicles is they are cheaper to buy, meaning they are easier to pay off or no payments, at all! They can also be cheaper to insure, as we will explain in the following information. Keep reading to learn how to know the best time to lose your collision/comprehensive insurance. 

If you have just bought a used vehicle or if you own an older vehicle — you probably will reach (or already have reached) a point when you will want to consider dropping your insurance coverage to liability only.

There are two main types of auto insurance coverage:

  1. Comprehensive/Collision/Full Coverage
  2. Liability/PLPD

Comprehensive offers more coverage than liability (covering the other driver’s, their property and you and your property), but is considerably steeper in price than liability. Liability is much cheaper, but it covers much less — liability covers anyone else who was involved in the vehicle, their medical bills and property repair/replacement. Therefore, while getting the bare minimum insurance is cheaper — it is also riskier. For example, you would probably not want to drop your collision coverage if you had fallen behind on your vehicle loan and you owe more to the lender than the car is worth.

Tip: If you are paying more each year than you would receive on a claim — full coverage does not make sense.

Insurance adjusters calculate per the vehicle’s adjusted Kelley Blue Book value rather than the original price paid or other figure. Find out your car‘s Kelley Blue Book value and compare it to what you owe in insurance costs each year. If your bills are much higher than the actual value of the car — you may want to reconsider whether you need comprehensive.

Therefore, in an effort to save money — many drivers will drop their comprehensive insurance, choosing to pay out-of-pocket in the event of an accident.

While liability coverage may be a great way to save money, because of the potential risk involved — it is difficult to know when it is time to drop full coverage for your used vehicle.

Many experts believe car owners should drop collision coverage when the vehicle is ten years old or older. While this may be a good method, it does not work for everyone. Other factors may be present including, a loan or lender terms, value of the vehicle, personal preference, etc. The ten-year mark is a good point in your vehicle’s life to look at what you’re paying now, what your car is worth and check out the liability rates to determine the best option for you.

In most cases, drivers would not want to carry full coverage on any vehicle that is old or has a low value. If you are concerned about dropping the coverage on your older or used vehicle — when you switch to liability, start saving the money you would have spent on collision coverage and put it towards buying a new car.

The bottom line — comprehensive coverage can get expensive and it never hurts to shop around for liability insurance quotes, especially when your premiums become too expensive.

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