1. Keep collision coverage if you still have an outstanding loan on a car. Most lenders insist that you carry this coverage for the life of the loan.
2. Consider dropping collision coverage if you have a safe driving record.
3. Examine your financial status carefully before making this decision. If you have the money you’d need to repair the car, go ahead and drop the coverage. If you don’t think you’ll have enough money to repair the car yourself, you’re probably better off keeping the coverage
4. Consider dropping collision insurance on cars that are five years or older. Insurance companies determine car values that closely match the Kelley Blue Book values. As you know, these begin to fall as soon as the car leaves the showroom.
5. Drop collision insurance if the annual fee for the coverage is 10 percent or more of the car’s value. For example you can probably drop the coverage if your car is worth $5,000 and your annual collision coverage costs $500.
Tips & Warnings
- Keep your uninsured motorist coverage even if you drop collision. That way, you are covered if an uninsured driver damages your car.
Put the money you save by dropping collision coverage in a special collision savings account. That way, you can have the extra cash to pay for the repairs if you are in an auto accident.