Your son told us about your unfortunate incident. First off, it’s fantastic that you were able to attend another high school reunion. We understand that everyone had a great time. It’s always exciting seeing old classmates.
Your son mentioned that back in school you were known as a “bad girl.” A “tough cookie”, if you will. He told us that, at the reunion, you decided to live up to your old reputation and relive your glory days. Pfft, after all, 72 years of age is just a number.
After dinner was served at 4:30 p.m. sharp, you told your former classmates that things were about to get exciting. As you began to shuffle out to your Lincoln Continental (which you so aptly named Lincoln), you shouted, “Hey listen up all you Cat’s, I’m not playing Bingo tonight and put away my needlepoint!” You had other things on your mind.
A crowd gathered outside to watch as you did donuts in your old high school parking lot. The tires “burned rubber” and screeched just like you remember. You yelled to the crowd, “Matthew McConaughey ain’t got nothing on me!” Ah yeah, nostalgia and adrenaline filled your body. The crowd screamed your name and said, “We can’t believe you can still brody!” Uh oh, that last screech sounded a bit different. The crowd rushed over because that screech was the sound of the Lincoln hitting apole. Umm, who put thatpole there? Thank goodness you are okay.
Also, thank goodness that you slowly drifted from being a female James Dean in your teen years to a conservative woman and have never thought to drop collision coverage. Well– not so fast Jane Dean. Who should be more thankful that you did not drop collision coverage all these years? You, or the insurance company?
Of course, your son contacted us because he is not only concerned about your physical well-being but he is concerned about your financial well-being too. Your son wanted us to give you our thoughts regarding when to drop collision coverage. So, if any of the following 5 things apply to you, you might want to drop your collision coverage.
Reason 1 – You Own Your Car
Congratulations! Welcome to the promised land! The land of milk and honey! No more payments! Free at last! Free at last!
If you no longer have to make payments on your automobile, you might want to drop collision coverage. Usually, for most people, the financing of an automobile ends after 4 to 5 years. At this time, the decrease in the value of the automobile is usually substantial. In some cases, if a vehicle owner dings up their car, they will simply live with the collision damage. In other cases, the owner is willing to pay out of pocket.
If you can’t live with a dinged up car or if having to pay for repair damage to your vehicle would cause a mini panic attack, you may not be ready to drop collision coverage.
Reason 2 – Your Car Isn’t Worth Very Much in Value
If you can afford to pay for damages equal to the value of your car, you might want to drop collision coverage. For example, if your vehicle is worth $5,000 and you can afford to pay up to $5,000 for any damages after an incident, it may be worth it to drop collision coverage. Even if you were to have coverage, an insurance company will never pay more than the value of the vehicle. So, in this example, $5,000 is the most that you would receive from the insurance company.
I have a buddy whose car is worth $500 according to Kelley Blue Book. He doesn’t want to drop his collision coverage because he believes that the insurance company will pay him more than the $500 if something were to happen to his vehicle. I keep trying to convince him to drop the coverage because auto insurance companies don’t give away money. The company will only make you whole. An insured can not come out ahead.
Also, we haven’t even factored in the deductible. The deductible that my buddy has is $250. If he wrecks his car, and if the insurance company is generous enough to value the car at $500, my buddy will receive $250 ($500 value – $250 deductible) from the insurance company. That’s another thing,. Although according to Kelly Blue Book my buddy‘s car is worth $500, the insurance company might value the car for even lower than $500.
If your automobile is 10 years or older, the value of the vehicle is probably low. Do you need collision insurance on an old car? Probably not. However, if you are the type who doesn’t like the idea of having to spend your retirement income on something like car damages, and would rather have the insurance company take care of things, you may want to rethink whether you should drop collision coverage. You just have to keep in mind the value of your car and the deductible because you just might receive a check for $250 on an automobile for which you have paid thousands in insurance.
Check out KBB if you would like to get an idea of how much your car is worth.
Reason 3 – You Don’t Use Your Car Very Often
If Lincoln spends most of his time at home and only goes out on special occasions, you might want to drop collision coverage. While there is always a chance of an accident, the chance is lessened when the car is in the garage most of the time. Studies show that the average driver will have an accident only once every 10 years. Of course, if you are accident prone and whenever Lincoln leaves the garage, he gets beat up in some way, you may not want to drop collision coverage. You could also consider simply raising your deductible since you don’t drive Lincoln very often.
Reason 4 – Your Car Has High Mileage
If Lincoln has “been around the block a few times” (hee hee — do you see the pun — “around the block”), you might want to drop collision coverage. The higher the mileage on a vehicle, the less it’s worth. The insurance company will pay less for damages on a higher mileage vehicle than a vehicle that is the same make, model, and year with fewer miles. It doesn’t matter if it’s a current year vehicle either. Sometimes automobile owners think that the only thing that matters is the age of the vehicle.
Reason 5 – You Can Afford to Pay for Collision Repairs Yourself
If your family is referred to as “The Rockefeller’s of New York” or “The DuPont’s of New Hampshire” or something along these lines, you might want to drop collision coverage. Actually, if you have one of these names, it’s probably more like you never needed collision coverage in the first place. If the rich run their automobile into a tree, they can buy another car just like it the very next day (luckies).
Needless to say, if you paid cash for your automobile, you can probably afford any repairs or can afford to buy a new vehicle if something happens. No need to pay the insurance man for collision coverage. You can stick it to “The Man” by sending him a stern letter letting him know that you are going to drop collision coverage.
Who needs those peskyauto insurance companies anyway? With all their darn lobbying activity forcing most of the country into minimum liability coverage. Oops, sorry for the rant. That’s a different letter for another day.
So When Should You Drop Collision Coverage
For most people, the chance of having an accident is slim. That is, of course, if accidents aren’t attracted to them. You should calculate the cost of your collision coverage and compare that amount to the amount that you think you might lose in case of an incident. If you were to remove collision coverage and your auto insurance payment goes down by $50 a month, you have saved $600 per year. So, if you don’t have an accident for another 5 years, that’s a savings of $3,000.
You can always consider setting aside some or all of that hypothetical $600 to go toward any future collision damages. When you do this, you are basically self insuring for collisions.
Some experts even suggest a 10% rule. In a nutshell, the rule is if your car is worth $3,000 and your deductible is $500 but your collision coverage cost more than $250 ($3,000 – $500 x 10%), the experts suggest that you might want to drop collision coverage. Otherwise, these experts feel as though it’s not worth it to drop collision coverage.
Really, the bottom line is whether you want to take a chance and drop collision coverage today and pay for collision damages yourself. On the other hand, if you decide to keep your collision coverage for the rest of eternity, the insurance company just might be happy that you did.