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Overpaying on car insurance?

Overpaying on car insurance?

Overpaying on car insurance?

When To Drop Collision Insurance: A Guide

when to drop collision insurance

Many drivers have collision coverage on their car insurance policy. While collision insurance can come in handy for a brand new car or expensive vehicle, it’s not necessary to have it. If you have been paying for this type of coverage for your car and are wondering when to drop collision insurance, this guide can help you decide if you still need or want it.

Do I Have To Have Car Insurance?

All states except Virginia and New Hampshire require minimal car insurance. Having car insurance can help pay for damages to your car and medical expenses caused by an at-fault car accident. Each state has specific requirements for insurance coverage. In most states, driving without at least the minimum liability coverage is against the law and you will pay a penalty. So, the answer is yes, you do need car insurance in the states that mandate it.

What Are the Minimal Types of Car Insurance Needed?

Most states mandating car insurance require you to have at least the basic amount of liability and property damage coverage on your vehicle. Each state requires different amounts of these two basic insurance coverage types, but in general, expect to pay about $25,000 for property damage. Most policies provide $25,000 per person or $50,000 per accident for bodily injury liability. Some states also mandate the policy owner to have underinsured or uninsured motorist coverage.

Property Damage Liability

If you’re involved in an at-fault auto accident, property damage liability covers the cost of repairs to the other person’s vehicle. However, property damage liability does not cover repair expenses to your vehicle. That’s where collision insurance comes in.

Bodily Injury Liability

With this coverage, your insurance provider will pay for medical expenses for the other driver and passengers in an at-fault accident. As with property damage liability, this does not cover your own medical expenses.

What Is Collision Insurance, and What Does It Cover?

Collision insurance covers repair bills to your vehicle under a certain set of circumstances, including:

  • A collision with another vehicle, whether you’re at fault or not
  • Hitting an object like a fence or guardrail
  • A rollover
  • Road hazards like potholes
  • A non-fault accident and the driver is underinsured or uninsured

What Isn’t Covered by Collision Insurance?

While collision insurance is fairly extensive, there are times when this type of insurance doesn’t cover damages to your car, including:

  • A collision with an animal
  • Natural disasters like a flood or fires
  • Theft or vandalism
  • When you cause damage to property that’s not yours like a fence

What’s the Difference Between Collision and Comprehensive Insurance?

Now that you understand what collision insurance is and what it does and doesn’t cover, you may ask, what is the difference between comprehensive and collision insurance?

While collision insurance covers accidents, comprehensive insurance covers repairs for other types of damage to your vehicle including:

  • Falling objects like trees
  • Theft or vandalism
  • Natural disasters like hail or flooding
  • Fires
  • Damage from hitting an animal

When Should I Have Collision Insurance?

Most lenders require collision and sometimes comprehensive insurance until the vehicle is paid off, so during the time when you’re financing your car, you’ll most likely need collision insurance. Consider having collision insurance if you don’t have the means to pay for damage to your car when involved in an at-fault accident.

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, let’s say you’ve 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, you’ll 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 else’s. The lower the deductible, the higher your premium is.

When Can I Drop Collision Insurance?

While dropping your collision insurance can save you money on your insurance premiums, you want to carefully consider if it’s worth the risk of not having this type of coverage. After evaluating your finances (whether or not you can afford to pay-out-of pocket for repairs) and looking at the value of your vehicle, you can consider dropping the collision insurance under the following circumstances:

You Don’t Drive Often

If you don’t drive often, you’re less likely to get into an accident. If you keep your car for special driving occasions, you can consider dropping collision insurance.

Your Vehicle’s Value Is Low

If you’re driving a vehicle with a low market value, you may consider dropping collision insurance. Keep in mind that you want to know the market value of your car, as opposed to the mileage or year of the vehicle. Collision insurance is based on your vehicle’s cash value, not its age or mileage. If the insurance premium is higher than your car’s value, you probably don’t need this type of coverage.

You Can Pay for Repairs Out-of-Pocket

You have enough money in the bank to cover the repair bills. Is it better for you financially to have the money in the bank and pay for the damage in the event of an at-fault accident, or pay the premium for collision insurance?

What Happens If I’m In an Accident and Don’t Have Collision Insurance?

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 they’re involved, determine who’s at fault. If you’re at fault, your liability coverage will pay for the other person’s repairs, but no repairs to your vehicle. Without collision insurance, you’ll 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 you’re 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.

FIXD Research Team

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.

We’re 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.


About the Author

FIXD Research Team

FIXD Research Team

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.

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