Every year, you should make changes to your personal auto insurance policy. Since many lifestyle changes could've occurred in this time, it's helpful to ensure that you are both properly covered and not overpaying for insurance that you don't need. Once your car hits a certain age, it's at this point that you need to seriously reduce coverage. Here are four reasons why:
- You Don't Need Comprehensive or Collision Coverage: Once your car is considered to be an older vehicle and thus holds much less value, you don't need comprehensive or collision coverage any longer. The only coverage you need is liability because it is legally required of all drivers. You will save a great deal of money on insurance every month when you do this. Most likely, if your vehicle was to be damaged due to a collision or property damage from something, such as vandalism, your car won't hold enough value where it's worth having this kind of coverage.
- You're Paying More for Insurance Than What Your Vehicle Costs: As a general rule, you don't want to pay more for insurance than what your vehicle is worth. This means that you are paying more than what you would receive in the event of a collision. This is just another reason why you should drop collision and comprehensive coverage completely. In the end, you won't be spending more than what your car is worth.
- An Emergency Fund is Better: To ensure that you can replace your car in the event of a collision or other accident, it's much better to have an emergency fund so you can pay out-of-pocket for the repairs. All the money that you save on your insurance by dropping your comprehensive and collision coverage can go towards the emergency fund.
- You Might Just Want to Replace the Car Anyway: In the event that you are in an accident that does damage to your vehicle, are you going to want to replace the vehicle instead of dishing out the amount for the deductible to get the repairs done? If the answer is yes, then it's probably time to drop the collision and comprehensive coverage anyway. This way, you save money on insurance to put towards that emergency fund to ensure that you are able to buy a nicer and newer vehicle.
When you know some of the reasons to reduce insurance coverage for your older car, you can better determine when the time to do this would be to save yourself some money.