When Do you remove the “Comp” & Collision coverages from your car?
I was talking to a friend about this just the other day. First of all and most importantly, there is no “time” to do this. It has to do with what we call your threshold of pain. The coverage on your car is about the best insurance for all the things it covers. It covers collision and the “COMP” coverage basically covers the car for anything other than a collision. The usual things are not covered, such as, intentional acts, act of war, nuclear detonation, wear and tear and others. Your car (in most cases) will depreciate over time and at some point policy holders remove the “comp” and collision because it just isn’t worth it. This is when you have to figure out your threshold of pain. Here are the economics of it. First you need to determine what is the ACV value of the car. What can the car be sold for? Or most importantly, what will the insurance company pay for the car? There is no sure fire way to get this “right” but there are some ways to get close. First, try looking up the value at NADA to try to determine the “neighborhood” of the price range it will fall into. Be honest about the condition of the car, and use the lower value, remember we are talking about insurance companies here. Try Auto-Trader to see if you can find the exact year, make, and model of your car and try to get as close to the same mileage as your car. This is an excellent way to help prove why you think your car is worth what you think it is worth. Once you determine the value of the car then factor in the following: your deductible will not be paid to you, and look up your collision premium, because you have also paid that out of pocket.
Look at this example: The ACV of your car is $2,000 and you have a $500 deductible, and your collision premium (already paid) was $58, you will only benefit $1,442. Now this number is your threshold of pain number. What this means is, is the $58 savings worth the CHANCE of not getting $1,442? What would you do with the $1,442? For some people who have not had a claim in 10 years, they would much rather take the risk and save the premium because they can live with the POSSIBILITY of having a total loss and not getting any money from the company. Every one’s threshold of pain is different when it comes to money, so it is a very personal decision. It is YOUR policy, YOUR premium dollars your paying so make the best decision for what you are comfortable with. If there is a loan or lien on the car, the bank will most likely not allow removal of the Comp or collision. The State requires liability on any currently registered auto so removing comp and collision will not effect the liability coverages.
Talk to your agent and find out what your premium savings would be and figure out if it is worth the savings.