3 Situations Telling You To Stop Paying For Collision Insurance
The single thing that you really need in the way of insurance to be able to drive is liability insurance
. This is the insurance coverage to protect the other drivers on the street and their property in the event that you cause a wreck.
Another main category of insurance that is sold is collision insurance, this is what covers the damages to your vehicle in the event of anyone causing an accident. Collision insurance is not mandatory to drive, but there are certain circumstances in which you will have to purchase collision insurance. If you have to have collision insurance on your car, you will be notified.
If you don't have to have it though, cancelling this coverage is a good way to save money in your budget. Here are the 3 things that may be telling you that it is a good time to stop paying for that collision insurance.
Situation One: You Can't Afford The Insurance
Living on a small budget and having to cut corners where ever you can is becoming the norm for most in the last handful of years. If you find yourself in this situation and have to cut expenses, dropping the collision insurance on your car may be something that you want to think about. You will be able to save some money by not having the coverage to pay for and you will still be able to use your car.
Situation Two: You No Longer Have A Lienholder
Really the only circumstance that you would have to purchase collision insurance on your automobile is if you are making payments on it to a lienholder. A lienholder is the lease company or the business that loaned you the funds to be able to purchase your car in the first place. They are the ones that you are now making monthly payments to.
Lienholders insist that you purchase collision (and comprehensive) coverage on your automobile to protect their property. Until you satisfy your loan or lease with them, they really own the vehicle and don't want it damaged.
Once a lienholder no longer has an interest in a vehicle though, they can no longer make it mandatory for you to carry collision coverage on it. If you are looking to save some money by stopping your collision insurance, you are able to do so now.
Situation Three: You Have An Older Model Vehicle
If your vehicle is an older model or is just in pretty bad condition, having collision coverage on it may be costing you more than just paying for any damages. If you were in a car wreck and totaled your vehicle, your insurance company is only going to pay up to the value of the vehicle.
This could mean that you are paying out more in collision insurance premium than the insurance company will ever pay out for your vehicle. In this case, you would be financially better off to just stop the collision coverage and put the money you are saving each month away.
If you put the money into a separate bank account and do not touch it, you will have that money for any damages done to your vehicle. You are also going to be earning interest on it which is far better than just giving it to the insurance company for them to make more money off it.
The Consequences
While dropping your collision insurance is a fast money saving fix, you may have to pay for it later down the road.
If you were to ever cause a car accident and there were damages to your vehicle, your collision coverage would have been what paid to repair the damages (after your deductible). If you cancelled your collision insurance prior to the accident, the insurance company no longer has a responsibility to pay these damages for you. You will then have to pay for it out of your own wallet which may take away any money saving benefit.
by: Todd Clay
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