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Do I need full car insurance coverage for my older car?

Your older car probably fits your life like a good pair of shoes right? It’s comfortable affordable and you can use it everyday without too much worrying. Or maybe you’re squeezing one last year out of a rust bucket before it dies. Not everyone wants to spend a lot of money on their vehicle – especially if what they have works just fine for their lifestyle. But what about car insurance coverage? Is it worth it for an older car? How much should you have? Can you eliminate the extras to save money? We’ll help answer these questions by explaining how a car’s age impacts your coverage options and the costs of car insurance.

Different Coverage Options for Older Cars

The amount of coverage you have on your car will depend on your budget the value of your vehicle and what benefits you want in the event of an accident. Some coverage options (such as guaranteed replacement cost) are unavailable for vehicles over a certain age. If your vehicle isn’t worth much (less than $5000) you may want to reduce costs by removing your collision and comprehensive insurance.

Collision insurance covers the cost of repairing your car if it’s damaged in a collision. Comprehensive insurance pays for damage done in on-collision circumstances such as theft vandalism or a hail storm. In both types your insurer will only pay for the estimated current value of your car minus your deductible (the amount you pay before your insurance kicks in). If your car is only worth $2 500 and you’re involved in a collision you’ll only receive $1500 after paying a $1000 deductible.

One rule of thumb is to eliminate collision and comprehensive insurance coverage on your vehicle once the annual premiums exceed 50% of the car’s value . So for a car that’s worth $3 500 you should consider cancelling collision and comprehensive coverage if you pay more than $1 750 each year for insurance coverage. The idea is that in two years time you’ve spent enough to pay for your car outright. “Insurance is about restoring you to the point you were at before the insurable incident occurred—to re-establish normalcy in your life,” explains Insurance Brokers Association of Canada.

The Impact of Your Car’s Age on Insurance Costs

The rule of thumb is the older the car the cheaper it is to insure (when compared to newer versions). But the age of a car isn’t the only factor when determining your annual insurance premiums. The car’s make model security and safety features and popularity among car thieves also impact the price. Of course your own driving record whether or not you commute and where you live also have a big impact.

Before You Cancel Coverage

But just because your car’s odometer is creeping up with age doesn’t mean you should automatically cancel your full car insurance coverage. You need to weigh your costs and savings with the risk of not having this coverage. Cancelling does have an impact on your future insurance costs. There are also situations where cancelling coverage even on an older vehicle just doesn’t make sense.    For example if your older car is a foreign import it may actually require expensive replacement parts or it may be a favourite for car thieves. If that’s the case full coverage may be very beneficial to you as out-of-pocket expenses could quickly add up.   If you’re leasing an older car you definitely will not want to cancel your collision or comprehensive coverage. In fact part of the lease terms may actually stipulate that you pay for this coverage so be sure to check your lease agreement.

The Classic Car Exception

You’ll need to determine whether or not your trusty ride is just an old car or if it’s a valuable classic car. In general cars are classified as classics when they reach a certain age and have been rarely driven. So a 1957 Chevy Bel-Air is a classic (by anyone’s standard!) but a 1980 Toyota Tercel is not. To find out if your old car qualifies as a collector car or deserves classic car insurance check out Hagerty’s online qualification tool. If you do have a classic car keep in mind that regular car insurance does not adequately protect this type of vehicle.

Get coverage based on your own comfort level

While car insurance coverage may be standard throughout the province insurance premiums are not. Coverage from one company to the next can vary by hundreds if not thousands of dollars and while cancelling portions of your coverage can mean significant savings it could leave you facing a catastrophic financial loss. When examining your coverage just be sure you’re paying for what you need. For instance some drivers will consider skimping on liability insurance but even a clunker of a car can cause a lot of damage to other vehicles or people so keeping this coverage is essential to protecting you from a large financial burden.   The only way to make sure you are getting the best base price for your policy is to compare and the best way to do that is to talk to an independent insurance broker. Your broker will shop the market to find you the best coverage at the best rates leaving you to enjoy your cruising.