When Should You Drop Collision Insurance on Your Car

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 who’s 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? Let’s look into the details of collision insurance and when you should consider dropping it from your car insurance policy.

What is collision insurance?

Collision insurance helps pay for repairs or replacement of your vehicle if you are involved in a collision with another car, or an object such as a fence or a light pole.

Your collision insurance covers the damage to your vehicle, regardless of whether you were at fault or if the other driver caused the accident.

Some examples of incidents that collision insurance would cover include:

• Someone rear-ends your car.
• You back into a mailbox.
• An animal walks in front of your car and you swerve, hitting a guardrail instead.

The cost of collision insurance coverage is based on the value of your vehicle. Your premium will be more expensive if you insure a high-end car, such as a Tesla, BMW, or Lexus.

When adding collision coverage to your car insurance policy, you select the deductible, which is the amount you pay out of pocket before your insurance kicks in. The cost of your insurance premium for collision coverage will be more expensive if you have a lower deductible.

For example, your cost for collision insurance will be higher if you have a $500 deductible versus a $1,000 deductible.

Is collision insurance required?

No state laws require drivers to carry collision insurance. Most U.S. states have laws requiring drivers to carry liability insurance, but collision and comprehensive coverage are optional insurance coverages you can add to your policy or drive without.

However, if you lease your car or are still making payments, the lienholder may require you to carry collision coverage. The lienholder is the bank or dealership that financed or leased your car.

When to drop collision insurance on your car

Since your cost for collision insurance is based on the actual cash value of your car, it may not be worth paying for collision insurance coverage on an older vehicle.

Experts recommend that you may want to consider dropping your collision insurance if the annual cost of the optional coverage is more than 10% of your car’s value. So if you are paying over $300 annually for collision insurance, but the value of your vehicle is $3,000 or less, then it might be time to drop your collision insurance.

What happens if you drop collision insurance on your car

If you drop collision coverage, your car insurance premiums will probably go down, so you’ll save some money. However, that savings could come at a cost if your car is damaged in an accident. Without collision insurance, you’ll have to pay for any repairs to your car out of pocket.

If you can’t afford to pay for auto repairs if your vehicle is damaged in an accident, then you may want to keep collision insurance even when your car isn’t worth very much.

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, you’ll probably have to pay at least $300 to fix it.

Before you drop your collision insurance, you should figure out your car’s value. You can get an idea of your car’s 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 car’s value is under $2,900.

Is collision insurance the same as comprehensive?

Collision insurance is often paired with comprehensive insurance on auto policies. However, collision and comprehensive aren’t the same type of coverage. When it comes to comprehensive vs. collision insurance, each covers different events where your car could be damaged.

Collision insurance covers damages to your car in collisions with other vehicles or objects, such as a tree, mailbox, or guardrail. On the other hand, comprehensive insurance covers damages that aren’t caused by driving.

Comprehensive insurance covers:

• Weather events, such as hail, rain, or wind
• Natural disasters, such as tornadoes, hurricanes, earthquakes, and floods
• Fire
• Theft
• Vandalism
• Accidents that involve collision with animals

If you hit a deer, your car's damage is covered under your comprehensive insurance, not your collision coverage.

Is collision the same as liability insurance?

Collision insurance is not the same as liability insurance. While collision insurance covers repairs to your car due to an accident, regardless of fault, liability coverage pays for injuries or damages sustained by another driver in an accident that you caused.

Another difference between liability and collision insurance is that most states require drivers to carry liability coverage. But there are no laws requiring drivers to carry collision insurance.

However, a lender may require collision insurance if you are still making payments on your car, or if you lease your car.

FAQ

Bottom line

“Full coverage” insurance policies offered by some of the best car insurance options include collision and comprehensive insurance, which are both optional coverages that help pay for repairs to your car if it is damaged.

Collision coverage pays for damage to your car caused by collisions with other vehicles and objects. It is good coverage to have and may even be required by a lienholder if you are still paying for your car or leasing it.

However, if you have an old vehicle, then you may be paying more for collision insurance coverage than it's worth. Although experts say a good time to drop collision insurance is when your premium equals more than 10% of the car’s value, you’ll need to make sure that you have the funds available to pay for any repairs out of pocket if your car gets damaged in an accident.

If you would struggle financially if you had to pay for costly car repairs, it may be better for your finances to keep collision insurance.