Many people who own older cars are faced with a common decision when purchasing auto insurance — should I fork over the extra money for collision insurance?
Collision insurance pays to have your car repaired if you’re in an accident where you’re deemed at fault. If you don’t have collision insurance, you’ll have to pay out-of-pocket to repair or replace your damaged car.
Deciding not to purchase collision insurance would definitely save you money on your premiums, but that doesn’t mean it’s a good option for you. There are a number of things to consider when making your decision, such as —
How much your car is worth
When deciding whether or not to purchase collision insurance for an older car, you’ll first want to find out what the current value of the car is. This is called the actual cash value (ACV). You can get actual cash value estimates from several common sources, including Kelley Blue Book, NADA Guides, and Black Book.
Knowing the actual cash value of your car will be very important when reviewing collision insurance quotes.
How much collision coverage will cost
Once you know the actual cash value of your car, it’s time to start getting quotes for collision coverage. You’ll want to weigh your car’s actual cash value against the yearly cost of collision coverage.
For example, let’s say you get a quote for $500 a year for collision coverage, and the actual cash value of your car is $2,000. That means you’ll be paying 25% of your car’s value every year. With your deductible set to $500, the most you could receive in a total loss settlement would be $1,500.
Whether or not this sounds like a fair deal to you will depend on one more factor.
What you can afford to pay out-of-pocket
Now’s the time to look at your personal situation.
If you’re living paycheck to paycheck, receiving $1,500 to replace a totaled car may be exactly what you need. This is especially true if you are dependent on your car for work.
But if you have significant amount of money saved up that can be allocated to purchasing a new car, then you may want to forgo collision coverage.
Ultimately, the decision is yours. You’ll have to look at the numbers and weigh your options before making the right decision for you.
If you live in Louisiana and need help determining the right move for you, call Guffey Insurance Agency at 225-291-4544. As an independent agency, we can show you collision insurance quotes from several trusted insurance providers at once to help you with your decision.