State Farm Auto Insurance Practice Test

What factor may influence a customer's decision to drop Collision Insurance?

1. The age of the vehicle

2. The cost of premiums

3. The driving record of the insured

4. The number of claims made in the past

The correct answer is: The age of the vehicle

The age of the vehicle is a significant factor that may influence a customer's decision to drop Collision Insurance because as vehicles age, their market value typically decreases. Collision Insurance covers damages to the insured's vehicle resulting from an accident, paying for repairs or replacement up to the vehicle's actual cash value. If a vehicle is older and worth less, the cost of the insurance premium may not justify the financial protection it offers. Customers often reassess their insurance needs as the value of their vehicle declines, and when the potential payout in the event of a total loss is low, they may opt to eliminate this coverage to save money. This decision is often based on a cost-benefit analysis where the reduced premium is seen as a better choice for a vehicle that holds little value compared to the coverage provided.