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When to Cancel Collision Coverage

cc-5Collision insurance coverage insures your car in case of an accident. When you accidentally bump the rear of a vehicle in front of you and it damages your car, your insurance provider will pay for the damages up to certain limits. Your insurance provider will also pay for the damages to the vehicle you damaged. But there also comes a time in every car’s existence to cancel collision coverage.

First, determine how old your car is and it is also best to find out the actual value of your car. The Kelly Blue Book can be accessed online to determine the latest market value. It’s important to know because the collision coverage amount is 10% of the actual amount of your car in most cases.

Be as accurate as possible to maximize this coverage. Once you get your facts straight, you may find that your 20 year old Pinto or that old rust bucket is not going to be worth keeping collision insurance on any longer at all.

Next, ask yourself if you can afford to pay the replacement cost of your old vehicle. If your vehicle is worth less than your yearly insurance premium then you would certainly be better off to cancel collision insurance. There is some risk involved, but if you are prepared to take it and you know that your financial situation is solid, then you are ready to make that decision.

You may also want to consider your accident-free history, the better your driving record is, the less risks are involved to make the decision to cancel collision coverage.

The last thing you need to do is to determine if you have an existing loan on your car. If you still owe money on your car then you are required to keep collision coverage until you have paid the loan off in full.

Once you have determined all four of these important factors then you are ready to drop your collision coverage. Annual collision coverage is normally 20% and sometimes even more of your actual car value. That is how much you may be able to save when you drop collision coverage on your car.