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One Good Reason NOT to Cancel Your Collision Coverage

By Kevin M

Conventional wisdom holds that once a car reaches a certain age and book value that the collision coverage portion of an auto insurance policy be canceled. But I may have stumbled upon a compelling reason why you might not want to drop the coverage no matter how low the book value of your car.

My wife and I own two cars, both of which have long since been paid off and at least one of which has a book value low enough that most financial advisors would recommend dropping collision. However, as both cars are of advanced age, we’ve been renting vehicles for the two or three long distance trips where flying doesn’t make financial sense. This saves a small fortune over the purchase of four round trip air fares and gives us use of a late model vehicle a good distance from home.

When renting a vehicle, one of the requirements of car rental companies is current and adequate auto insurance coverage, including collision and comprehensive. Had we dropped our collision coverage, we would be required to pay for coverage through the rental company.

Our most recent experience

One of our annual rental experiences ocurs every year for the Christmas holiday. We travel from our home in Atlanta to the Northeast where our entire extended families are located, a distance of about 860 miles. Now to give an idea as to why we endure the hassle of rent/drive for such a great distance versus a 2.5 hour flight, the reason is all in the numbers.

This year, the lowest price we found on round trip air fare for our family of four was in excess of $1500. We found we could rent an intermediate SUV for 13 days for less than $800, or about half the cost of flying. The car rental also provides two substantial advantages. We have a vehicle for the entire time we’re away and, with it being Christmas, we need to ferry holiday related packages and luggage coming and going, something that’s far less convenient and more expensive when done by air travel.

For the substantially lower price and the tangible advantages of renting a car, we’re willing to endure a 16 hour car ride each way. And as a bonus, this year we did an overnite stay in Williamsburg, Virginia, for an early Christmas dinner–18th Century style–at the Kings Arms Tavern in that historic community. An experience like that just isn’t in the cards when you fly!

The payoff

But back to the car rental. $793 for a 13 day rental of an intermediate SUV with unlimited miles is a pretty good deal, especially when you consider the busy time of year it’s happening.

Our regular auto insurance policy coverage extends to use of short term rental cars as long as the vehicle rented is in the same value class as the vehicles we already own. Translation: they won’t cover the rental of a Mercedes if your regular car is a Camry. Since we continue to maintain collision and comprehensive coverage, we’re fully covered for a car rentals.

Had we dropped our coverage as is often recommended, we’d be forced to pay $26 per day for coverage through the rental company. That’s $338 for 13 days, or about 40% higher than the base rental price. Now conveniently, $338 is close to the additional annual cost of keeping collision and comprehensive on our policy. It’s worth it then to keep the coverage just for car rental purposes and any additional benefit we might receive as a result will be in our favor. And again, we typically rent cars for two or three long distance trips per year to save wear and tear on our own cars.

Good deal, or am I missing something?


7 Responses to One Good Reason NOT to Cancel Your Collision Coverage

  1. nickel says:

    Sounds like a good deal to me. I hadn’t ever thought about it from that angle.

  2. Kevin M says:

    Me either! I stumbled upon it by accident and thought it was worth a post.

  3. I am in the camp that DID cancel coll/comp coverage about a year ago, but you bring up a point I had not considered. However, I rent a car so infrequently (actually, I have never rented a car personally) that this would not affect me, but I’ll have to keep it in mind if that changes.

  4. Justin says:

    You can get collision damage coverage through a travel insurance policy, or by itself I believe on travelguard.com. Its like $7-9 a day for coverage.

  5. Kevin M says:

    Thanks for the tip Justin. Sometimes a major credit card offers coverage too, but many of them have canceled that benefit in recent years. Sometimes they’ll cancel the coverage in one of those multi-page, fine print disclosure forms that most of us ignore, and you don’t find out about it until you go to rent a car.

    $7-9 a day sounds like a good deal, as long as you don’t also have to pay an annual fee, otherwise keeping your collision might still be a better way to go. We were quoted $26/day by the rental company.

  6. Deanna Llewellyn says:

    I’m a former insurance agent, and the owners of the agency I worked for, would at a customer’s request, add collision coverage for the duration of a client’s car rental term. If you were renting a vehicle for a trip, we would add collision coverage for the days you were renting the car, and remove the collision coverage when you turned the rental car in. Cheaper than keeping collision coverage on year-around.

  7. BG says:

    We don’t carry collision coverage (cheap paid-for cars). For rentals, we use our Visa credit card that covers us. Just call your credit card company and confirm first (before each rental), and make sure you pay for the rental with that credit card. We have a no-fee Simmons Visa card and is good on their Classic, Gold, and Platinum varieties.

    Why pay anything when you can get it for free?

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