When to Drop Collision Insurance Coverage and Maintain Your Car

If you own a car that's worth less than $3,000, dropping collision insurance coverage might be a good option. This is because the cost of repairs will likely exceed the vehicle's value.

Your car is also a good candidate for dropping collision coverage if it's more than 10 years old. At this point, the cost of repairs is often more than the car's worth.

You've probably heard that cars depreciate quickly, losing up to 50% of their value in the first three years. This means that even if your car is still in good condition, its value may not be worth insuring.

The cost of collision insurance can be a significant factor in deciding whether to drop it. Collision insurance can cost around $814 per year, with comprehensive coverage adding another $367 per year.

The value of your vehicle is also a key consideration. If your car is older and has depreciated significantly, it may not be worth the cost of collision insurance. In fact, if purchasing collision coverage for your older car is 10% or more of the vehicle's value, it's likely not worth it.

A study by the National Association of Insurance Commissioners found that the average monthly premium for collision coverage is around $42, and the annual premium is around $503.99. Comprehensive coverage averages around $20.38 per month and $244.58 per year.

Here's a rough breakdown of the costs:

Ultimately, the decision to drop collision insurance depends on your individual circumstances and financial situation.

The average cost of collision and comprehensive coverage can add up quickly. $814 per year is the average cost of collision coverage.

Collision coverage includes a $500 deductible, which can be a significant expense. This is in addition to the average cost of comprehensive coverage, which is $367 per year.

To put these costs into perspective, let's break down the average annual cost of collision and comprehensive coverage for drivers in various states. Here's a list of the average annual cost of collision and comprehensive coverage for drivers in California, Colorado, Florida, Michigan, New Jersey, New York, Texas, and Washington:

Your vehicle's value might be lower than you think, especially if you're considering dropping collision and comprehensive insurance. The insurer will reimburse the actual cash value of the car, which is often the wholesale price at auction.

This can be a shock, especially if you've been looking at resale values on Edmunds and NADA Guides, which are often higher. The difference between the two can be significant, with the wholesale price being much less.

For older cars, the situation is even more pronounced. They depreciate quickly, making them more likely to be written off in an accident. This means that if you're considering dropping collision coverage on an older car, you might be surprised to find that it's not worth the cost.

If purchasing collision coverage for your older car is 10% or more of the value of your vehicle, it's likely not worth the expense. In that case, cancelling it might save you money on your insurance.

Collision insurance and comprehensive insurance may seem like they cover the same things, but they're actually quite different. Collision insurance covers damages to your car in collisions with other vehicles or objects.

Comprehensive insurance, on the other hand, covers damages that aren't caused by driving. This includes weather events, natural disasters, fire, theft, vandalism, and accidents involving animals. If you hit a deer, for example, your car's damage is covered under your comprehensive insurance, not your collision coverage.

Here's a breakdown of what comprehensive insurance covers:

As you can see, comprehensive insurance provides a broad range of protection for your car, beyond just collision damage.

You can drop collision insurance at any time, but it's not always a good idea. The standard rule of thumb used to be that you should drop collision and comprehensive insurance when your car is five or six years old or when the mileage reaches the 100,000 mark, but now it depends on the value of the car and its replacement parts.

If your car has depreciated significantly and is only worth a few thousand dollars, it may not make sense to keep collision coverage. You should also consider dropping collision insurance if you have a sizable emergency fund to cover emergency expenses.

Here are some factors to consider when deciding whether to drop collision insurance:

If you're not in a financial position where you can afford a new car, it's better to keep collision insurance. You should also keep collision insurance if you're not a lucky driver or have a poor driving record, as you'll be at higher risk of getting into an accident.

Weighing the deductible is a crucial step in making a decision about your car insurance policy. A high deductible can save you money in the long run, but it also means you'll pay more out of pocket if you need to file a claim.

The deductible amount can be in the thousands of dollars, so it's essential to consider this when choosing your policy. For example, a $2,000 deductible on a total loss car valued at $5,000 leaves you with only $3,000.

Having a low deductible, on the other hand, can lead to more claims being filed with the insurer. This is because you'll be more likely to file a claim for minor damages that you could fix at your own expense or ignore.

Poe warns against having the lowest deductible, as it increases the risk to the insurer that you'll file a claim. This can lead to higher premiums in the long run.

Here's a comparison of deductible options:

Keep in mind that having a high deductible may ultimately save you money, but it also means you'll pay more out of pocket if you need to file a claim. The insurer may charge you more for the next three years if your claim exceeds $1,000.

Making the decision to drop collision and comprehensive insurance depends on several factors, including the value of your car, its replacement parts, and your financial situation.

The standard rule of thumb used to be that car owners should drop collision and comprehensive insurance when the car was five or six years old or when the mileage reached the 100,000 mark, but now it depends on the value of the car and its replacement parts.

If your car has depreciated significantly, it might not be worth keeping comprehensive and collision coverage, especially if your deductible is almost as high as the value of the vehicle.

You should consider dropping collision insurance if you're not in a financial position to afford a new car, but it's worth keeping if you're not a lucky driver or have a poor driving record.

If you're leasing or financing your car, you may not have the option to drop either collision or comprehensive, and will probably be required to carry both until your lease is complete or your car has been paid off.

The 10% rule is a good guideline for collision coverage: if the collision coverage costs more than 10% of the vehicle's total value, it might not be worth it.

Here are some factors to consider when deciding whether to drop collision and comprehensive coverage:

Ultimately, the decision to drop collision and comprehensive insurance should be based on your individual circumstances and financial situation.

If you're still paying for collision insurance on a vehicle that's worth less than $3,000, it's likely time to drop the coverage. This is because the cost of repairs often exceeds the vehicle's value, making it a financial burden to keep collision insurance.

Cars with high mileage, such as those over 100,000 miles, often have a higher risk of needing costly repairs, making collision insurance less necessary. This is especially true if the vehicle is no longer being driven or is used primarily for occasional errands.

If you've made a significant down payment on your vehicle, you may be able to afford repairs out of pocket, eliminating the need for collision insurance. This is a viable option if your vehicle is relatively new and in good condition.

Cars that are easily replaceable, such as those with high Kelley Blue Book values, may not require collision insurance. If you can afford to replace your vehicle quickly, you may not need to worry about the cost of repairs.

Dropping collision insurance coverage can be a cost-effective decision, especially if your vehicle is old or has a low value.

If your vehicle is worth less than $3,000, it may not be worth paying for collision coverage, as the cost of repairs may exceed the vehicle's value.

Most insurance companies won't cover repairs that exceed the vehicle's value, so you may end up paying out of pocket.

You can also consider dropping collision coverage if you've paid off your loan or lease, as the lender or lessor is no longer at risk if the vehicle is damaged or stolen.

If you're still making payments on your vehicle, you may want to consider keeping collision coverage to protect the lender's interest.