There are no set rules. But there are considerations if you’re deciding whether or not an older vehicle still needs collision coverage.
What is your vehicles actual cash value?
www.nada.com or www.kbb.com are website sources you can use to determine the actual cash value.
Remember to be realistic when evaluating your vehicles current condition, as it can make a big difference in the vehicles value.
How much do you pay for collision coverage?
Look at the declaration page of your policy to see how much the collision portion is costing you. If your vehicle is worth $2,500 and you are paying $500/year for collision coverage, you are paying 20% of your vehicles value to carry collision coverage. You also have to factor in your deductible. If you have a $500 deductible and the $2,500 vehicle is a total loss, the most you could recoup is $2,000.
What services or options would you forfeit if you drop collision?
Some policies don’t allow you to purchase rental reimbursement or towing coverage unless you have collision coverage, as well.
What is my deductible versus the actual cash value of the vehicle?
If your vehicle is only valued at $1,000 and you have a $1,000 deductible, it wouldn’t make sense to insure the vehicle for collision. You don’t want to pay for insurance that’s not going to benefit you if a loss occurs.
Each situation is different. You have to think about your risk tolerance and your ability to purchase another vehicle if this one is deemed a total loss. If you have the savings to do it, then perhaps you don’t need to keep that collision coverage. If you don’t have the savings and you need the insurance settlement for the actual cash value of the vehicle to purchase another vehicle, then you may want to keep the collision coverage.
