High Market Value Vehicles

• Collision coverage is essential to protect a vehicle with a high market value. A vehicle with a high market value is typically a new vehicle or a vehicle with expensive after-market options installed on it. This type of coverage is beneficial for a vehicle with a high market value because it ensures repairs are made to the vehicle regardless of fault in an accident. Collision coverage may also be a requirement for your car if the vehicle is financed. You may have to maintain this coverage until the vehicle is paid off.
  
  

Used Vehicle Coverage

• The value of collision insurance is usually limited to the fair market value of the insured vehicle. If you drive a car with a low market value, you may want to eliminate collision coverage from your insurance policy. Removing this coverage is a good idea for an older model vehicle because the cost of repairs in an accident is likely to eclipse the vehicle's value. When this happens, your insurance company writes you a check for the vehicle's fair market value in lieu of paying for repairs. Eliminating this coverage can lower your overall monthly insurance premium.
  
  

Higher vs. Lower Deductibles

• Collision coverage doesn't have to be expensive. You can still protect your new vehicle as required by your lender and select a high deductible to lower your overall monthly insurance premium. A high deductible of $1,000 can help keep your premium low but it also requires you to pay an upfront cost of $1,000 before your insurance company pays for any damages sustained to the vehicle. A lower deductible between $250 and $500 may cost you more monthly but you'll pay less when the vehicle needs repairs from an accident.
  
  

Dropping Collision Coverage

• As your vehicle ages, it may become necessary to remove the collision coverage from your auto insurance policy. According to Lending Tree's website, when the annual premium cost for your collision coverage eclipses 10 percent of your vehicle's fair market value, it's time to drop the collision coverage. For example, if your car has a fair market value of $5,000 and your annual premium for collision coverage is more than $500, you should drop that coverage from your larger insurance policy.