At What Point Should I Consider Lowering Collision Coverage on My Auto Insurance?

You should consider lowering your collision coverage (which covers damage to your car) when the value of your car drops well below the damage you expect to do to it.

When you buy automobile collision insurance, you are essentially betting your insurance company that you are going to have an accident that is your fault. This appears to be a bad bet for customers but a great but for the insurance companies, as they profit by taking in more collision premiums than what they pay out in collision claims. $25,000 may seem like a lot of money to ordinary individuals, but sums like that don’t phase large insurance companies nearly as much, which is how they’re able to stay in business..

People worry about causing damage to or totaling their cars even though car accidents are low probability events. There are around 6,000,000 car crashes in the United States every year, which translates to one for every 500,000 miles driven. If you are a typical driver putting 12,000 miles a year on your car, you may be involved in around 1 car crash every 42 years, and you might not even be at fault for that crash. For more statistics, visit the Research and Innovative Technology Administration’s website at www.rita.dot.gov.

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The rarity of car accidents is one of the reasons the vast majority of drivers think they have above-average driving skills – though, actually, only 50% of them do. This is partially because people confuse skilled driving with good driving and partially because car accidents are infrequent (when calculated on a per-mile-driven basis). While there is no definitive computation for deciding whether to keep collision insurance, a good rule of thumb is to hold on to it if you’ve had more than one at-fault accident in your driving career.

In addition, visit the Advice Archive at Kelly Blue Book. Other questions to ask yourself when wondering whether you should lower your collision coverage are: