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When To Drop Collision Insurance

Its All About You We Want To Help You Make The Right Coverage Choices

When to Drop Collision Insurance? : Answers to Insurance Questions

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Your Car Isn’t Worth Much

The payout limits on your comprehensive and collision policies are based on the actual cash value of your car. ACV is what your car is worth when factoring in depreciation. If your car is stolen or totaled, ACV is what you’re paid out for a replacement. If your car isn’t worth much, what you pay for full-coverage car insurance may be better off in a savings account.

Is It Worth Paying For Full Coverage Insurance On An Old Car

It depends on how much your car is worth. If additional coverages like collision and comprehensive insurance cost you more than 10% of your cars value per year, then you may want to drop them from your insurance policy to save money.

However, if you drop collision and comprehensive insurance coverage, then youll have to pay out of pocket for repairs that otherwise would have been covered.

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When To Drop Full Coverage On A Car

Updated on Friday, March 4 2022 | 0 min. read| by Aaron Besson

It might not be worthwhile to hold on to full coverage insurance. We’ll help you figure out if you should drop it.

You should hold on to full-coverage auto insurance until your annual premium meets or exceeds the estimated payout if your car needs to be repaired or replaced. If your car is five or six years old, the payout for replacement probably isn’t worth what you pay in premiums.

This article will cover:

Five Reasons To Consider Keeping Comprehensive Coverage:

Comprehensive vs Collision Coverage: What You Need to Know
  • You live in an area with inclement weather.
  • You live in a rural area with a lot of animal-related auto accidents.
  • You live in an area with lots of auto-related crime, like theft and vandalism.
  • You park your car in an uncovered area with lots of trees.
  • You cannot afford an emergency $1,500 repair to your car.

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Your Policy Probably Wouldnt Pay Out

If the cost of your repairs doesnt exceed your deductible, you may not be able to cash out your policy if youre in an accident.

Typically this isnt an issue for most drivers.

But if your old car is worth, say, $400 to replace, but your deductible is set at $500, youre unlikely to get the money you need in order to replace your car through insurance.

If thats you, then you may be better off just leaving that money in savings.

The Difference Between Comprehensive And Collision Insurance Coverage

Comprehensive insurance is important because it covers damage caused by nature including hail, flood, and fire.In addition, comprehensive coverage provides you with coverage for theft and vandalism as well as damages caused by animals.Collision insurance covers all collisions that occur with your vehicle including if you strike another car, an animal, or an object such as a tree, or fence.

As you can see, each of these types of coverage offers something valuable and different to your insurance coverage.

Both types can be expensive, however. In order to keep your premiums down, you will need to choose a deductible level that you are comfortable with.The deductible represents the amount of money you will pay out of pocket if you make a claim. You should check with your insurance company to see what the deductible options are.

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When To Drop Collision Insurance

Knowing when to drop collision coverage insurance can help you protect your finances. Canceling collision insurance may be the best direction to take in some situations, such as when you can afford to pay for repairs out of your pocket or if your car isnt worth the cost to insure it.

Commons Reasons to Drop Collision Insurance
  • ScenarioReasoning
  • Your collision premiums cost more than your cars actual cash value.Cars depreciate as soon as you drive them off the lot. Knowing your cars cash value is essential. For example, if its an older model and only worth $1,750, but youre paying over $2,000 in premiums, you might consider dropping collision coverage.
  • You can afford to pay out-of-pocket for damages out of pocket.Collision insurance helps you save money on repair costs after a crash. But if you can afford to pay for these costs out of pocket, collision coverage may not be necessary.

How much your car is worth today is known as its actual cash value .

To get your cars AVC, subtract depreciation from its replacement cost. Kelly Blue Book can help you determine how much its depreciated.

Your ACV is affected by several factors. These include:

  • Your cars year, make and model
  • Collision history

Knowing your cars present value can play a significant role in deciding when to drop collision insurance coverage.

What Happens If Im In An Accident And Dont Have Collision Insurance

Should I Drop My Comp and Collision Car Insurance Coverage?

The first thing to do in an accident is to make sure everyone is okay and, if needed, call emergency services. Next, the insurance companies, and the police if theyre involved, determine whos at fault. If youre at fault, your liability coverage will pay for the other persons repairs, but no repairs to your vehicle. Without collision insurance, youll have to determine whether you want to spend your savings on repairs or not repair it at all.

Evaluate your situation to determine when to drop collision insurance. When youre looking to get the best rates, deductibles, and overall car insurance for your driving needs, find a professional auto insurance broker who can work with your budget to get the best policy for you.

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

Were here to help you simplify car care and save, so this post may contain affiliate links to help you do just that. If you click on a link and take action, we may earn a commission. However, the analysis and opinions expressed are our own.


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How To Save Money On Collision Insurance

There are certain things you can do to ensure you get the best deal on collision insurance. First, bundling different coverages, such as liability, collision, and comprehensive, might get you a discount. Second, you might want to consider the insurance cost before choosing your ride. Other aspects car insurance companies take into consideration when calculating your annual collision coverage premium include:

  • The mileage you cover each year
  • Your credit score
  • Your driving history
  • Your deductible amount

Even though collision insurance is not a part of a minimum required level of coverage in any state, it is a valuable product to have. Without it, you might find yourself in financial trouble, having to pay for everything out of pocket. If you are not sure whether or not you need this protection, always consider if you will be better off financially with or without this type of insurance.

Check this out if you need additional information, resources, or guidance on car insurance.

Why Is Collision Insurance Important

Collision insurance can help cover vehicle repair or replacement costs if youre in an accident with another car, get hit by an uninsured driver, roll your vehicle, or collide with a fixed object like a telephone pole or mailbox. But if youre in a crash and dont have collision coverage, the insurance company wont help. Youll have to pay out of pocket to fix your car.

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When Should You Drop Full Coverage On Your Car

You should drop full coverage on a car, or at least consider it, if:

  • The car is old, or older.
  • The car has a lot of miles on it.
  • The car isnt worth much.
  • You dont drive much.
  • You can afford to pay for repairs out of pocket.
  • You plan to replace your car soon.

The information below explains why you may want to stop full-coverage auto insurance which usually includes liability, collision and comprehensive coverages in these situations.

When Should You Not Drop Collision Insurance

What Does Auto Collision Insurance Cover

There are a few situations where it may make more sense to keep the added protection. They are :

  • You dont have the funds to buy a new car : If you can’t afford to replace your automobile, it is reasonable to keep the protection.
  • You are leasing or financing : If you have a vehicle lease or loan, it may be part of the terms.
  • You have a history of accidents : The added protection can help cut costs on your claims and premium.
  • You dont like taking risks and would rather have peace of mind : Having it part of your premium will make the claims process easier.

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When Should You Drop Collision Insurance On Your Car

Last updated Oct. 24, 2022| By Danielle Letenyei| Edited ByMindy Woodall

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Almost all U.S. states require drivers carry liability insurance to pay for damages to another driver’s car if they are at fault in the accident. But collision insurance covers the damage to your car regardless of whos at fault in an accident.

Collision insurance is good to add to your car insurance policy for extra protection, but do you need to carry it forever? When is a good time to drop collision insurance? Lets look into the details of collision insurance and when you should consider dropping it from your car insurance policy.

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How Much Is Collision Insurance

On average, the annual cost of collision insurance in the U.S. is $377.62, according to data provided by the National Association of Insurance Commissioners. However, the cost of your car insurance will depend on many factors, including your location, age, driving record, claims history, your vehicles value, and more. Each insurance company calculates premiums using its own method, so its smart to shop around to find the best deal.

What Should You Do If Youre In A Car Accident And Dont Have Collision Insurance

When should I remove collision coverage from my auto policy?

If you get into a car accident, first make sure everyones OK, and call 911 if necessary. Next, determine if your vehicle is damaged and if so, determine who is at fault for the accident. If the other driver is at fault, they and their insurance company will be responsible for repairing your damaged vehicle.

However, if youre at fault, the responsibility will fall on you. If you dont have collision coverage, youll need to decide if the vehicle is worth repairing and if so, how to pay for it. Common options include your income, emergency fund, savings, credit, or borrowing from a friend or family member.

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Does Collision Insurance Come With A Deductible

Yes, it does. What is a deductible? This is the amount of money you have to pay out of pocket before the insurance carrier pays for repairs. For example, lets say youve been in an at-fault accident or in a collision with an uninsured or underinsured driver and the damage to your car is $2,000. If your deductible is $500, youll have to pay the $500 and the insurance company will pay the remaining $1,500. Car insurance deductibles only cover damage to your car and not anyone elses. The lower the deductible, the higher your premium is.

When Can I Drop My Full Coverage Car Insurance

Most states require certain levels of auto insurance at all times, but you can technically drop full coverage whenever you want to. You should decide if full coverage is worth it to you depending on how much risk you would take on without it.

If you have full coverage and are considering dropping it down to more basic coverage, there are some things to check first.

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Key Terms In This Article

Here are some common terms you will see associated with collision coverage.

A deductible is a set amount that is subtracted from a claim payout. When you buy your insurance policy, you select your deductible. If you choose a high deductible you will have a lower car insurance premium, but you will also pay more out-of-pocket if you make a claim.

Actual Cash Value

The value of your car in its current condition, not the price when you bought it or the trade-in value at a dealership. Cars decrease in value over time, so the actual cash value of your car will be less than the purchase price.

When Should I Take Collision Coverage Off My Auto Policy

What is Collision Insurance? Collision insurance covers damage to your ...

The rule of thumb for dropping collision insurance is to drop it when a vehicles annual collision premium, plus the deductible, cost more than 10% of the vehicles current value. Some experts also advise dropping collision insurance when the vehicle is more than 10 years old. Since the average driver gets into an accident once every 10 years, these rules exist to keep drivers from paying more for insurance over time than they would get from filing a claim. However, you should think of these rules as loose guidelines while also taking your individual circumstances into account. For instance, if you cannot afford to replace your vehicle and you need it for transportation, dropping collision insurance could leave you stranded or in debt. Similarly, if you have a history of at-fault accidents, or a teenager is leaning to drive using your vehicle, you are particularly likely to need collision insurance. You can calculate your vehicles insurance by going online to Edmonds, Kelley Blue Book or NADA.

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Bet On Yourself To Be A Safe Driver

When thinking about your auto insurance coverage, bet on yourself to be a safe driver, advises Poe, adding that, 95% of all drivers havent had an at-fault accident in three years. That reduces the statistical need for collision insurance, which pays for repairs if you crash into a building, tree or someone elses car.

But comprehensive insurance covers a whole host of common problems that dont always involve your own driving, such as fire and falling tree branches that crush the roof.

Hail storms are also a familiar threat, especially to car windshields that are also vulnerable to road litter scooped up and thrown by car and truck tires. Some states now require insurers to repair windshields without cost to the car owneras a safety measureif the vehicle has comprehensive coverage. Other common threats include theft, not only of a car, but also of expensive parts like the airbags found on all newer cars.

And there is always the threat of a natural disaster. An estimated 250,000 vehicle owners lost their cars in 2012 when Superstorm Sandy inundated the New Jersey and New York coastlines.

Ultimately, like most forms of insurance, it comes down to peace of mind.

Before dropping comprehensive and collision, says Bach, ask yourself: Whats my plan to replace the car if its lost?

How Much Money Could You Save If You Drop Collision Insurance

According to the Insurance Information Institute, the average cost to carry collision coverage on your car insurance policy is about $290 per year. If you have average auto insurance rates, then dropping collision insurance from your policy could save you almost $300 per year.

However, car repairs after an accident could cost you thousands of dollars. If your bumper gets dented in a fender bender, youll probably have to pay at least $300 to fix it.

Before you drop your collision insurance, you should figure out your cars value. You can get an idea of your cars value through the Kelley Blue Book guide or the National Association of Automobile Dealers NADA guides. If the average cost of collision insurance is $290, you may consider dropping your collision insurance if your cars value is under $2,900.

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