When to Drop Collision Coverage

Last modified: August 5, 2021

Whether you ask yourself, “Do I need collision insurance?” or wonder what exactly collision coverage is, you’ve landed at the right place. Continue reading our article to have these and other related questions answered. 

Many people don’t really know the difference between the full coverage and the collision. Neither are they aware of when it’s the best time to consider collision coverage in their policies. One thing is sure: collision and comprehensive coverages are required by law for everyone buying a car with a loan or leasing it.

However, you need to know when to drop collision coverage since it’s not required when you own your car or have a clean driving record and much experience. 

What Is Collision Coverage?

First, let’s define what collision coverage is. As the name suggests, this auto insurance can cover your vehicle in the event of a collision with another car or object. However, this coverage is not the same as liability coverage. 

Let’s look at the situations when collision coverage applies:

  • An event that involves only your car, such as rolling over
  • An event in which your vehicle collided with another object such as a tree, sidewalk, etc.
  • An event in which your car was hit by another vehicle, such as a crash
  • An event in which another vehicle bumped into your parked car 

Be aware that collision coverage will reimburse you for damage to your car only, but not for damage you`ve made to other vehicles or objects. Neither will it cover bodily injuries sustained in the accident.

Collision insurance is not required by law, and you are not obligated to have it unless your car is bought on loan/lease.

Collision and comprehensive coverages go hand in hand and cover most damages to your vehicle. So it’s always a smart option to be safe rather than sorry. Also, it’ll be useful for new drivers without much experience on the road. Going uninsured for the events mentioned above can cost you thousands of dollars. Apart from that, every driver should know when to drop collision and comprehensive coverages

 What Collision Insurance Covers

Now that you’re aware of the collision coverage definition, you should also know that it’s just a part of full coverage. It covers the following:

  • Damages made in a collision with another vehicle or object
  • Damages due to hitting an obstruction on the road
  • The repair fees if a car gets hit while parked
  • Repair or replacement of a new vehicle in case of a rollover 

The collision coverage covers your vehicle’s repairs or replacement regardless of whose fault it is. However, that’s not how the liability coverage works where you have to cover for the other car’s damage. If you want to cover your car for both collision and non-collision damages, you should include comprehensive car insurance. Usually, collision and comprehensive coverages come as a package.

It’s on you to decide if you need this kind of coverage since if you have 20 years of experience on the road, you might not require it. But if you are leasing your car or paying a vehicle loan, comprehensive and collision coverages are required by law.

What Collision Insurance Doesn’t Cover

Before purchasing a collision insurance policy, you should decide whether you need it and if it suits your needs. So, what does collision auto coverage not cover? Let’s list all the things. 

  • Bodily injuries acquired due to any event covered by the collision insurance, including your or other people’s medical bills 
  • Theft or robbery of the vehicle
  • Any damages caused by falling or flying objects
  • Damages caused by natural disasters like flood, hail, storms, or fire
  • Damages caused by being hit by an animal
  • Vandalized vehicle
  • Damaged vehicle due to lack of maintenance
  • The other driver’s injuries or car damage 

What collision coverage does not cover is covered by comprehensive coverage. So, it’s best to decide what you need. However, if you are not sure about it, discuss your options with your policy provider.

Is Collision Coverage Required?

Generally speaking, you are not required to have collision coverage when buying a car. But if you’re leasing it or getting a car loan, then you are obligated to purchase collision coverage. Also, if you own your car outright, purchasing collision and comprehensive coverages is optional. Since many factors impact your decision, it would be best to consult with your insurance provider.

So, why is it obligatory to have these coverages? Your unpaid car is still an investment to the lender, who hopes that everything will go smoothly and, in the end, the car will be fully yours. But until then, the lender protects its investment by insuring it from every possible scenario. 

Although these coverages are required by law, it doesn’t mean that you would be stuck paying them forever. When the car loan is paid off, again, it’s up to you to decide whether you want to keep or drop the collision coverage. You might even change it and purchase uninsured motorist coverage. In that way, you can protect your vehicle against damages from uninsured or underinsured drivers or hit-and-run accidents.

Cost of Collision Insurance

The average cost of collision insurance is $382 per year. This is added on top of the cost of liability coverage. Let’s look at three major factors that affect the cost of collision insurance:

  • Your driving history
  • The value of the vehicle 
  • The amount of the deductible that you are ready to pay

If you have a spotless driving record, you will save more cash than a high-risk driver with several accidents. However, your gender, profession, education, and marital status will also influence the final price. The average nationwide cost for this type of insurance is $596 per year.

Collision insurance is insurance that has a deductible, the amount of money that the policyholder has to pay out of pocket for car repair before the insurance coverage kicks in. The typical cost of collision insurance deductible ranges between $100 to $1000 a year. In case you have a low deductible, you will pay less out of your pocket to repair the damages, but a lower deductible equals higher monthly premiums. At the same time, a higher deductible results in lower premiums.

Is There a Deductible for Collision Coverage

Some insurance coverages have a deductible, and some don’t. Many companies set deductibles in a percentage of the total amount of insurance instead of dollar amounts, but the way the deductible works is the same.

A collision coverage deductible is the amount of money you have to pay if you need to make a claim. This means that if you make a $1600 claim with a deductible of $600, the insurance company will pay $1000, and you will be responsible for the remaining $600. 

Now, how do you decide how big a deductible you need? Many people opt for as little as $250, while others go for $2500. Depending on the deductible you choose, you will either pay more in monthly premiums to get a lower deductible or pay less in premiums so that you can get a higher deductible to be fully covered if an accident occurs.

This decision is complex, so you need to think of many factors like your yearly savings, how much experience on the road you have, and most importantly, assess your risks.

The tricky part with the collision coverage deductibles is that when your car needs the repairs, you must be able to pay your full deductible because there are insurance companies that will only pay if you paid your part upfront. If, however, you can’t afford your deductible, there is a chance that you won’t be able to repair your car right away. If you are not at fault, you do not have to pay the deductible unless you file a claim with your own insurance.

Collision Coverage vs. Comprehensive

Generally speaking, these two coverages are like twins, and they are always going together because what is covered by one is not covered by the other. Therefore, it’s important to have two of them, especially if your car is not paid off. 

The differences between comprehensive vs. collision coverages are mainly in the coverage which they provide. As the name suggests, the collision coverage will only protect you from a collision with another vehicle, object, or rollover. Regardless of whose fault it is, it will pay your claims if the deductible is paid. 

All the other unwanted events are covered by comprehensive insurance. But it’s strongly advised to purchase them both since comprehensive coverage helps you with different types of losses that are not usually a result of driving your vehicle. It’s more about protecting your car against floods, tornadoes, hails, theft, or falling objects that have damaged your vehicle.

We’ve made a table highlighting the covered events by both coverages to help you understand the differences. 

 Comprehensive vs. collision coverage

Comprehensive Collision
What is covered? Theft Single car rollover
Falling objects Collision with another vehicle
Fire Collision with an object
Damage caused by an animal
Natural disasters
What is not covered?  Damages to the other person’s vehicle Damages to the other person’s vehicle
Yours or other passengers’ medical bills  Yours or other passengers’ medical bills

When to Drop Collision Coverage

Now that you know more about these two types of insurance, you may wonder when to drop comprehensive and collision coverages. Typically, you should consider dropping collision and comprehensive insurance when the mileage reaches the 100,000 mark or when an automobile gets five or six years old.

Moreover, for dropping the collision insurance, you must take into account the cost of the repairs of your car and figure out how safe of a driver you’re. The chances that you will need this coverage are low, so when asking yourself, “When should I drop collision insurance?” check what this coverage includes and whether you require it before making the final decision.

With comprehensive insurance, different rules apply. If you are paying too much for comprehensive coverage based on the value of your car, you should consider if it’s worth it. To know this, simply remove the deductible from the value of your automobile. Then, subtract the cost of the six-month coverage. If you get a negative number, paying for comprehensive coverage is likely not worth it, and you’ll need to contact your insurer to stop your payments.

However, everything depends on the car’s worth and the worth of the replacement parts. A Mercedes, for example, may be worth the cost of paying a collision and comprehensive coverage for a couple of years longer than a Nissan Sentra. The replacement parts might be so costly that they will easily exceed the deductible. If that’s the case, you’ll need these coverages for a little longer.

Although collision and comprehensive insurance are sometimes purchased together, they are two different forms of coverage. You have the option of dropping one or both. Keep in mind that you won’t be covered for certain issues if you don’t have collision or comprehensive insurance. Also, another critical aspect you should be aware of if you’re wondering when to drop full coverage is if your vehicle is financed. In this case, even if it’s old, it is required by law to have these two and even more coverages because theoretically, any car on loan is still owned by the lender. To safeguard their investment, lenders require consumers to carry full insurance until the vehicle is fully paid.

How to Save Money on Collision Insurance

It’s best to go for full auto coverage because it will cover you in many situations. But unfortunately, it can cost double the price of the minimum required coverage. The price is affected by multiple factors like your age, place of residence, and driving record. To help you with your search, here are some tips for saving money on insurance.

One way you can lower the overall cost of collision coverage is by opting for a higher deductible. It’s also a risky option because it means that every time your car needs a repair, you will have to pay a high deductible for your insurance company to pay for the rest of the repairs. Moreover, you will be obligated to pay for every small repair out of pocket.

Therefore, it’s essential to research the costs and weigh your options. Many insurance companies offer a ton of benefits that you might qualify for, which is an excellent way to save on insurance. There are five categories of auto insurance discounts. Some of them are automatically added to your quote, while others require driver initiative. Some examples of discounts include:

  • Safe driver discount
  • Good student discount
  • Loyalty discount
  • New car discount
  • Low mileage discount

Contact your insurance provider and ask if you qualify for any available discounts.

Another way to save on insurance is to make sure that you pay and renew your policy every year so you won’t end up with unnecessary coverage. For example, if you paid off your car or the vehicle lease period passed, you can drop your collision and comprehensive coverages. Also, you can receive discounts if you’re staying with the same insurance provider for a long time, especially if you have a good driving record. Finally, you won’t lose any money if you pay your policy within your due date or during the grace period. 

How to Lower Car Insurance After an Accident?

If the accident were your fault, it would take three to five years for the car insurance company to stop penalizing you for the accident. The number of years depends on how serious injuries were and if the driver was reckless or intoxicated. On the other hand, many companies are willing to ignore your first mishap, which wasn’t your fault, and not raise your premium if your driving history is clean and you haven’t made any insurance claims. 

Below are a few ways to lower your car insurance after an accident:

  1. Be honest about your accident and tell everything to your insurer
  2. Look for a new policy
  3. Raise your deductible
  4. Make use of other insurance discounts

In Conclusion

Collision insurance offers a wide range of coverage in case your vehicle gets damaged in an accident. However, not every driver needs it, so before buying collision coverage, you should define your needs first and only then shop around for the best offers on the market. Moreover, you should be aware of when to drop collision coverage. You can easily find all this info in our article. 

FAQs

Is it worth having collision insurance on an old car?

If the price of your collision insurance is 10% or more of your vehicle’s value, it’s probably not worth it. However, collision insurance is mandatory if your car is financed or leased. Moreover, consider keeping collision insurance if you have a history of claims and accidents.

Should you have full coverage on a 10-year-old car?

First of all, the full coverage for older cars is more expensive. Secondly, it is likely to be a poor investment for vehicles older than 10 years. Mainly because after this period, the annual cost of insurance represents 46% of the value of older-model cars. Moreover, the difference between a yearly premium and the vehicle’s value is often less than $1000 for a 10-year-old car.

When should I drop comp and collision coverage?

You should drop your comp and collision insurance when your annual premiums exceed 10% of your car’s value. Since, at this point, the insurance payments are nearly worthy of your car’s value, which is not cost-effective. Due to comprehensive coverage being more affordable, you might decide to keep it longer, but there are also instances when it is not worth it at all, for example, if your vehicle holds a low value.

Does car insurance go down as the car gets older?

It all depends on the drivers and their driving history. Generally, car insurance rates decrease with drivers gaining more experience behind the wheel because insurers see less risk in insuring them. According to stats, many drivers are less likely to file a claim as they age. But don’t forget that you will also lose many discounts if you happen to be in an accident.

What is a fair price for car insurance?

The average cost of car insurance is $1,592 per year or $133 per month. But as we mentioned before, the rate depends on many factors like your driving skills, credit record, the car’s safety record, and so on. If, however, you are younger than 25, you will likely pay higher premiums because the insurer will see you as a high-risk, inexperienced driver. While more factors affect the price, there are also plenty of discounts that you may use. So, ask your insurer about them while buying the policy to save some money. 

Should I have full coverage on a 15-year-old car?

No, you don’t need full coverage on a 15-year-old car since it’s not worth the money. You will probably receive your vehicle’s actual cash value after an accident, which usually barely exceeds the extra insurance cost.