Why Reduce Coverage On Old Cars

Many times, when you look for auto insurance online quote or for insurance tips, you will see one tip that is almost on any webpage: if you own an older car, then you should reduce your insurance coverage. Few people understand why you should reduce coverage on old car.  Now we will explain the main reasons, and hopefully, we will help you save a lot of money.

oldcarFirst of all, we recommend you to determine the value of your car.  There are several sources that will provide actual cash value (ACV) estimates online or through publications. Common sources for ACV estimates are N.A.D.A. Guides, Kelley Blue Book and Black Book. These will give you a good idea of what your vehicle is worth. If you’re not sure which source to use, you can contact your insurance company to see how its claims department determines ACV in your area. Often, one of these guides is used by claims representatives to establish a vehicle’s ACV.

If you keep a car any length of time (as you should, if you want to save a LOT of money) there comes a decision point where you need to decide whether to drop collision and comprehensive insurance.  If the car is older, in many instances, the repair costs of even a minor collision can exceed the value of the car. For a 10-year-old car worth maybe $5000, the most you will get paid out is $4500, if you have a $500 deductible.

Generally, you will have to follow a simple mathematical golden rule. Add the comprehensive and collision coverage premiums and multiply them by ten. If the value of the car is less than the number you got, then you should probably drop those two policies from your current insurance coverage options.

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