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Removing Unnecessary Auto Insurance

The prospect of removing unnecessary auto insurance protection may seem like an unpleasant or daunting task, but it can be done rather easily and efficiently if you do the proper research and understand exactly what each mode of insurance represents and when might be an appropriate time to carry or drop that portion of your policy. Prior to removing extra protection like collision insurance, for example, you need to research your vehicle's value and find out for sure whether the cost of such insurance protection really has surpassed its value.

Think about your insurance needs as an individual driver, and the ways they might affect your need for carrying certain elective portions of your policy. And finally, consider the affects any changes you make to your policy might have on the plan as a whole, and follow through to make sure such cutbacks are reflected in the price you pay for your policy as time goes by.

Research Your Vehicle's Value

For some, but not all, elective modes of car insurance protection, the basis for the limitations of protection is the monetary value of the vehicle. For example, this is true of both collision and comprehensive car insurance. Both collision and comprehensive insurance provide protection for the insured vehicle against loss of use, damage or destruction from covered causes. The maximum payout for collision or comprehensive insurance is essentially the value of the vehicle as determined by the auto insurance provider, less deductible.

As the vehicle ages, its monetary value decreases or depreciates. The phenomenon of depreciation exists independently of the rate at which you repay any car loans or other financial obligations on the vehicle. Many drivers believe that when they purchase "full coverage" auto insurance (which is generally liability insurance plus collision and comprehensive), that they will be covered for their entire loss in the event of an accident. Some even mistakenly think their insurance protection will provide for the entire cost of a new car if theirs is totaled in an accident or other loss.

The truth is, collision and comprehensive are tied only to the value of the vehicle, not its new replacement cost or the amount of money you owe on it. If you owe more than the vehicle is worth, you will be responsible for the difference in the event of loss, unless your policy has additional provisions for gap coverage or other additions scaffolding the totality of protection against loss.

When you are considering dropping collision, comprehensive or both, you should first do a little research into your vehicle's actual cash value. This can be slightly tricky, since your insurer may not use a publicly accessible standard like the blue book value of a vehicle to assess how much it is worth. Even so, you can get a good feel for the value by looking at blue book or some other similar resource to give you a basis for judging your need to keep this type of insurance active in your policy.

Think About Your Insurance Needs

As the car declines in value, so too does the value of and the need for collision and comprehensive insurance protection. Once your vehicle's value goes below a certain threshold, the justification for carrying these modes of insurance is much more difficult to come by. Many experts in the industry give as a general rule advice against carrying collision insurance once its costs exceeds 10 percent of the vehicle's value, for example. But these rules are not hard and fast, and you certainly have to take many factors into account.

Collision and comprehensive are probably the two most expensive options you could drop from coverage, potentially saving you a lot of money. But you should only drop collision and comprehensive insurance when you are sure their value has been surpassed by their cost. You must do so in a context of honestly evaluating your individual needs. For example, ask yourself whether you could afford to make repairs to your vehicle or replace it out of pocket if it were totaled in an accident and you had no collision insurance. Alternately, as yourself what you could do with the potential savings from dropping collision. Could you set enough aside to quickly build up a down payment toward a new car? The basis for your decision is clearly many-sided, and all sides need to be weighed carefully.

But collision and comprehensive are not the only parts of your car insurance policy you could drop if you were trying to save money on your premium. For example, you might have roadside assistance or towing coverage which you may not need for one reason or another. Your policy may have rental car insurance built in to it. Or you may have an older car for which you are still carrying insurance protection you can no longer justify based on the numbers.

Consider Affects to Your Policy

When you make the decision to drop some portion of your auto insurance policy, you have to do so while considering the full effects such a decision will have on your policy as a whole. For example, examine the impact on your premium. If you are waffling about whether to drop a certain portion of protection and you find that the financial savings would be minimal, that can make your decision to hang on to that portion a lot easier for you.

You also must be sure of the changes that will result in terms of your responsibilities in certain circumstances. For example, if you do decide to drop emergency roadside assistance, you are essentially self-insuring against the risk of needing such protection at any given time. You might choose to simply bear that risk entirely on your own, or you may decide to join an auto club or some other group offering towing services and other emergency assistance items. Either way, it falls on you to figure out how you are going to adjust to whatever changes are wrought by your decision to drop some portion of your auto insurance policy.

On top of dealing with the responsibilities of such changes, you also need to be mindful of the necessity of keeping track of your policy and the way it is affected by your reduction in voluntary coverage. You ought to look into how much your premium will change before making a choice, but also double check after the fact to make sure that the promised savings have actually come to pass. In certain cases, auto insurance companies might have a hard time adjusting your policy to your specifications, and it is up to you to check up on things and make sure the changes were made according to your wishes, and that the premiums have also been adjusted as promised.

It is smart to assess your auto insurance every six months, or at least every time renewal approaches. Take a fresh look at your policy and make a careful determination of whether you really need all the insurance you are paying for. Removing unnecessary auto insurance from your policy can save money, but decisions to remove portions of the policy should be made with all facts present.

 

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