Until recently, I hadn’t thought much about the collision part of my car insurance. When my car insurance renewal papers arrived, I puzzled over them for a while trying to see if there was any way to reduce the premium.
To figure out whether it’s worthwhile to carry collision insurance, you have to know how much the insurance company will pay in the event of an accident. You’ll never get more than the write-off value of the car. Even though you might not want to get a new car, the insurance company won’t fix a car if the repairs cost more than they think the car is worth.
My car is getting older, and based on what the insurance company representative told me on the phone, my best guess of its write-off value is about $5000. I also have a $2000 deductible, and so the most the insurance company would ever pay me for my car is $3000. The fact that it is worth more than this to me is irrelevant.
For this $3000 of coverage I would have to pay $309. I doubt that the odds of writing off my car over the next year are over 10%, and since I can afford $3000 (in addition to the $2000 deductible) the collision insurance isn’t worth it to me.
One part of all this that I can’t understand is that the collision insurance on my car is actually higher now than it was when the car was new, even though its write-off value was considerably higher back then. Any insights from readers would be appreciated.