When you owe money to a car lender for your vehicle, your lender will have control over the types of car insurance coverages you have, but when you pay off your car, you gain control of this. After you make your last payment, you can technically drop all coverage on your policy down to the minimum type allowed in your state, if you wish; however, it may be important for you to consider keeping collision coverage, comprehensive coverage, or both. Here are several factors to consider as you decide whether to keep these coverages or not.
What each type is
Before removing either of these types of coverages, you should understand the basics of each one. Collision is a form of coverage designed to protect you against losses resulting from damage your car experiences if you do something that causes an accident with another vehicle. Without collision coverage, you would have to pay the repair bill for your own car. With this coverage, your insurance pays it even if it was your own fault.
Comprehensive is a type of coverage designed to protect you from the damages your car experiences from other types of things other than collisions. For example, comprehensive will compensate you for damages that occur to your car from hail, storms, animal collisions, theft, vandalism, and more.
Factor in the value of your car
If you are considering dropping either type of coverage, you should first factor in the value of your car. If your car is worth a lot of money, can you live with paying the repair bill if you cause an accident and have major damage to your vehicle? Without having these types of coverages, you would be the responsible party to pay for the repairs on your car, and this is why people often drop the coverages only when their cars are not worth a lot of money.
Evaluate your risks
A second thing to do is evaluate your risks. What are the chances you will cause an accident or experience damage from something that is not related to a collision? If you feel like your risks are high, keeping both types of coverages might be the best option for you right now.
Evaluating your situation is a great idea before you decide to drop these coverages on your policy. To learn more about your options with car insurance, talk to an agent today.Share