You're Wasting Money If You Pay This Type Of Insurance On An Old Car

Older cars often carry a certain charm — and sometimes even sentimental value — so it's only natural to want the best protection. This can lead drivers to opt for collision insurance, but in many cases this insurance product is not worth the expense. Collision insurance is an optional protection designed to cover the costs of a repair or replacement if a car is damaged by another vehicle or stationary object. While this type of coverage sounds reasonable, it really only makes sense for newer vehicles with higher market values. According to Your Good Insurance, if a vehicle is valued at under $5,000, drivers are better off dropping collision or comprehensive coverage in order to save money on their car insurance premiums.

The proof is in the math. For older vehicles that have gone down in value, collision coverage can often end up costing more than the benefit it actually provides.  For example, if a car is only worth $2,000 but a driver pays $743 — the average cost of collision insurance per year, according to Insurance.com – and has a $1,000 deductible, an insurance payout after an accident would barely surpass what was already spent on premiums.

When it comes to older vehicles, most drivers are better off sticking with liability insurance rather than paying extra for collision. Liability coverage is required by law in most states and provides protection for any damage a driver might cause to other drivers or property. In the event that a driver is at-fault in an accident, liability coverage will protect them from facing massive out-of-pocket costs for damages — even if those damages exceed the value of their own car. While this coverage won't cover repairs for the at-fault driver's vehicle, the financial impact of this can be much easier to absorb with an older car that already has a low value.

As new car prices continue to increase, with some drivers paying over $1,000 a month for their cars, it increasingly makes financial sense to keep your older car around longer. Not only can this save you from the large purchase, but having an older car also allows you to cut out unnecessary add-ons like collision coverage — thereby reducing your overall transportation expenses. With that said, car insurance premiums are also on the rise, so make sure to shop around before committing to a policy.