When to Drop Collision Coverage From Your Auto Policy

When buying car insurance, there are plenty of decisions to make regarding the types and amounts of coverage you add to your policy and also which insurer offers the best coverage at the most affordable rates. Seeking out a large number of quotes and comparing policies side-by-side is your best option, and finding a good Independent Agent or broker capable of providing you with multiple quotes makes this task much easier than attempting it on your own. Plus, a knowledgeable agent/broker can answer questions and clear up any confusion you might be experiencing regarding the ins-and-outs of the typical car insurance policy.

What You Really Need

All car insurance policies in North Carolina start with liability coverage, which is required of all drivers using public roads in the state. The minimum coverage mandated by law is 30/60/25, which translates to $30,000 maximum payout for bodily injury of one person per accident, $60,000 maximum payout for all bodily injury claims and $25,000 maximum payout for property damage. Liability coverage benefits pay nothing to you as the policyholder but only to others suffering a loss in a vehicle accident where you are found to be at fault.

It should be painfully obvious that these required minimum amounts are far below what the actual costs of an accident could reach, especially if multiple drivers are involved. Any bodily injury medical costs or property damage costs over and above the amount of your liability protection will have to come out of your pocket, which is why many drivers increase their liability coverage limits to much higher amounts, such as 250/500/100. Some drivers will opt to add an umbrella policy, which typically will have a limit of one million dollars, especially if they have significant assets to protect from being lost in a court judgment.

What you don't necessarily need is comprehensive or collision coverage, especially if you own a low-value vehicle that you could easily replace if it was totaled in an accident. When you total up the cost of collision coverage, which may be $500 per year, and add in the amount of your deductible should your car be damaged or destroyed, maintaining collision protection may not make sense. Unlike liability, the cost of a totaled vehicle is capped by its actual cash value. If you couldn't afford to replace your vehicle in the event that it's damaged beyond repair, collision coverage may be a worthwhile investment.