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When to Drop Collision Insurance? : Answers to Insurance Questions

I'm Frank Daris America's top insurance

attorney today we're going to talk about

when can we finally drop that collision

insurance we have on our car we all need

liability insurance that protects us

from damage we do to others or their

property but this isn't necessarily true

for collision and comprehensive car

insurance those coverages cover repairs

or replacement of your car if you're an

accident that's your fault or losses

caused by theft vandalism and natural

disasters the reason these aren't always

needed is because the potential benefit

may not be worth the premium you're

paying compared with the actual risk the

biggest question to ask would the amount

paid by your insurance company really

helped you after you've paid your

deductible or would it be better to drop

the coverage altogether and save that

money as a rainy day collision or theft

fund consider the actual replacement

cost value of your car you can do this

pretty easily through the NAD a guides

kelley blue book or the black book be

realistic look at the condition of your

vehicle including the dents the sun

damaged the upholstery and the mileage

or you can call your insurance company

see how their claims department

determines the actual cash value in your

area a good way to decide whether or not

you need collision insurance is to look

at the policy or look at the Blue Book

value determine the value of the car

subtract the deductible on the policy

from the vehicle replacement cost the

remaining amount would be the actual

benefit of carrying that coverage now

consider the annual premium you pay you

got to divide this number by the actual

benefit of the policy they would take

before the total premiums paid

would surpass the actual replacement

cost of the vehicle that's a lot of

gobbledygook but here's a simple example

for a $15,000 actual benefit for a loss

that had an annual collision premium of

$100 the result would be 50 years so now

consider the likelihood of you getting

into an accident

for our example the likelihood of

getting into an accident over the course

of 50 years would be fairly high so

you'd want to keep the coverage but for

a car whose actual benefit is 700 the

likelihood of you getting in an accident

within seven years might not be so high

you also want to consider other factors

that will affect the likelihood of you

getting into an accident for example

have a long commute the chances of

getting into an accident are greater for

someone who drives a few miles to work

every day as opposed to someone who has

a long-distance drive the older you get

the more comfortable you are with

driving you become more responsible and

you learn to be a defensive driver in

this case your accident rate will

decrease until you hit the tender age of

80 another good rule of thumb is the

older your car gets the less likely you

are to need collision insurance you

might be better off saving that money

for a new car really think about how

much you could afford out-of-pocket if

you're living paycheck-to-paycheck a

settlement from the insurance company

may be exactly what you need to replace

your vehicle however if you have savings

and are making a comfortable living you

may not be afraid of making a down

payment if your car was totaled I'm

Frank

darris founding partner of Daris law

Ontario California

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