One of the most often asked questions we receive from clients is, when should i remove physical damage coverage from my vehicle. The answer to this question will vary from person to person but one number needs to be determined before you can make an informed decision, your blue book value. At the end of this post I will share links to several resources for you to make your decision.
Once you determine what your older vehicle is worth you will be close to the total amount an insurance company will pay out in the event of a “total loss” claim. They have other factors they will consider such as, what are the cost of parts in your area or availability of replacement vehicles in your area. Your next step is to determine what you pay for physical damage (comprehensive, collision) coverage. For this you can reference your declarations page or call your agent.
{blue book value} – {physical damage premium} – {deductible} = your potential payout
You have to understand you pay that physical damage premium every 6 months or 12 months so as the vehicle gets older your potential payout also decreases. As your vehicle gets older and has more mileage on it your other variable (blue book value) also decreases. At some point you have to make a decision that it is no longer feasible to have full coverage and you would then switch your vehicle to liability-only coverage. There is no sense in paying money out when you wont receive it back in the event of a loss.
Covering your vehicle at liability-only is one of three options you have however. Option two is raising your deductibles. This will lower the premium you pay for physical damage coverage but it will also mean taking less of a potential payout in the end. This is generally more of a decision you will make up front when determining how much you can afford to spend if an accident happens. That being said, if the accident is someone else’s fault you will likely not pay a deductible.
Option three is you can drop Collision coverage and only leave Comprehensive coverage. This means that if you have a vehicle-to-vehicle crash you will not have coverage but you will be covered for “Other than Collision” events such as deer-hits, vandalism, theft and hale. These are all extreme likelihoods in Shawano County and most of Wisconsin so you can hedge your decision but keeping that on while saving the premium by removing collision.
In the end its your choice. You can take the formula above and do what is in your best interest.
