There are a variety of car insurance plans available on the market. The two most common types of car insurance are liability and collision coverage. All drivers are mandated to have liability insurance to cover any damage or injury that they may cause to other people. Collision coverage, on the other hand, is not required. There are several factors that you should consider when trying to determine whether or not you need collision insurance. The cost of repairs and detailing is one of the things to consider.
Collision coverage pays for repairs and detailing your vehicle needs if it is hit by another vehicle or object. Thus, when considering whether or not you need collision coverage, the value of your vehicle is one of the most important factors to consider, since almost all collision insurance policies only cover damage up to the cash value amount of the vehicle.
The age of the vehicle is also very important. You should not consider dropping collision insurance if your vehicle is under five years old. The value of a car begins dropping rapidly as soon as it is sold. However, until at least five years, the value of the car is such that collision insurance is an important investment. If your vehicle is five years or older, you can consider dropping collision insurance.
The best way to determine whether or not the value of your car is such that collision coverage is prudent is to first determine your vehicle's Blue Book Value. This is the value that insurance companies use to determine the cash value of your car and you can use this free service online to estimate the value for yourself. The standard recommendation is that a driver does not need collision coverage if the annual fee for collision coverage is more than ten percent of the cars cash value.
Another important factor to consider is whether or not you have an outstanding loan on your vehicle. Most lenders require that you maintain collision coverage on vehicles as long as there is an outstanding loan.
Whether or not your car's value is high enough to justify maintaining collision coverage, it is important for you to evaluate your individual financial situation. Without collision insurance, any damage your vehicle incurs due to your fault or an uninsured motorist is your financial responsibility to repair. Thus, it is important to determine whether or not you can afford any financial cost to repair or replace your vehicle in in case of accident. If you do not think that you would have enough available funds to cover the cost of vehicle repairs, you are probably better off maintaining collision coverage.