Collision Insurance

You should drop your collision insurance when your annual premium equals 10% of your car's value. If your collision insurance costs $100 total per year, for example, drop the coverage when your car is worth $1,000 since, at that point, your insurance payments are too close to your car's value to be worthwhile. Drivers can easily find a car's value with the online vehicle appraisal calculators from Edmunds or Kelly Blue Book.

When to Drop Collision Insurance

When you rarely use your car

The more you drive, the higher your risk of being in an accident – so if you don't drive often, your risk is lower than average. That means you could be paying for collision insurance that you're unlikely to need.

When repairing a car would not have a big impact on your finances

Maybe you have an emergency fund that you could use to fix your vehicle. If you're willing to spend your savings on car repairs, then it's safe to drop collision insurance. However, people often prefer their emergency fund to be a safety net for when they leave their job, face health issues, or need home repairs. It all depends on what you're comfortable with personally and how much you have saved.

When you're paying 10% of your car's value in premiums annually

The cost of repairs goes down as your car gets older, so you don't want to overpay as your car loses value.

Other Things to Consider Before Dropping Collision Insurance

The 10% rule for dropping collision insurance is not set in stone. But it's a good milestone to keep in mind because as the value of a vehicle falls over time, the value of its insurance coverage does too. And when you start paying a significant portion of your car's value in premiums each year, you're simply overpaying to offset the actual level of risk that remains – at least as far as collision damage to your own vehicle is concerned.

Collision insurance repairs or replaces your insured car if it's damaged, whether by another vehicle or an object like a tree or mailbox. This insurance covers up to the cash value of your car - which is where the 10% rule comes in. This rule most frequently applies to older cars or vehicles with a lot of mileage, as they are worth relatively low amounts. There are a few other situations where it might be a smart move to drop collision insurance, too.

When Not to Drop Collision Insurance

Every state requires car insurance except for New Hampshire and Virginia. However, the law doesn't mandate collision insurance. The only legally-mandated car insurance is liability coverage, for damages to someone or something that you accidentally hit with your car. Although collision insurance is optional, it's well worth purchasing for many people.

If you're financing your car, collision insurance is usually required. Otherwise, you might be stuck with a repair bill equivalent to the value of your new vehicle! If you're leasing your car, the same logic applies – most lessors require drivers to carry collision insurance, too.

In summary, it's a smart money move to drop collision insurance when your car is old or has high mileage, but you should definitely think twice about doing so.

Collision insurance is worth it if you would otherwise be unable to afford to replace your car after an accident or if you often drive in areas where the likelihood of an accident is high. Collision insurance can provide valuable coverage if you're at-fault for an accident, and it is often required for financed cars.

When Collision Insurance Is Worth It

• You cannot afford to repair or replace your car after an accident...

Collision insurance is a type of car insurance coverage that pays to repair or replace your car if you're involved in an accident, regardless of who was at fault. Collision car insurance is never required by state law, but dealerships and banks usually require it for leased or financed cars. It only pays for damage to your own vehicle, and it does not include coverage for medical bills.  

What Collision Insurance Covers

• ...

No, collision insurance is not required by law in any state, though you may need it if you lease or finance your car. Lenders and lessors usually require collision coverage to protect their investment in a vehicle that%s not fully paid off.

Collision insurance pays for vehicle damage caused by hitting another vehicle, hitting a stationary object like a tree or fence, or rolling over. Although collision coverage is not required by law, it may...

Collision insurance pays for damage to your car after a crash with another vehicle, regardless of who is at fault. Collision coverage also applies if you hit a stationary object like a tree or mailbox, if you're in a single-car accident like a rollover, or if there's damage from road hazards like potholes.

What Collision Insurance Covers

Covered

• Hitting another vehicle
• Being hit by another vehicle
• Hitting an object...

You need comprehensive and collision insurance if your vehicle is leased or financed. No state laws require drivers to carry comprehensive and collision insurance, but your lessor or lender will almost certainly require you to purchase both types of coverage. Even if you're not required to get collision and comprehensive insurance, you should still purchase them if you cannot afford to fix or replace your car after it is damaged.

Collision and comprehensive insurance cover vehicle repair...

An example of collision insurance is when your car insurance company pays for your vehicle repairs after you crash into another car or a stationary object like a tree. Another example of a situation covered by collision insurance is if you lose control of your car and it flips over. Collision insurance covers the actual cash value of your vehicle, minus your deductible, if it is damaged in an accident.

Collision Insurance Example 1: Your car...

No, collision insurance is not the same as full coverage, but it is a key component of a full coverage policy, along with comprehensive coverage and any state-mandated types of insurance. Collision insurance covers damage to the policyholder's vehicle after accidents they are at fault for.

Collision Insurance vs. Full Coverage

You need collision on an old car if you have an auto loan or lease. You should also keep collision insurance on an old car if you cannot afford to pay out of pocket to repair or replace the car after an accident.

A general rule of thumb is that you can think about dropping collision insurance if the premium exceeds 10% of your car's value, so it's possible that collision coverage might not be worth it...

There is only one type of collision insurance in most states, and it pays to repair or replace the policyholder's vehicle after a car accident. Collision insurance applies whether or not the policyholder was responsible for the crash, and it's usually required for leased or financed cars.

Michigan is the only state with different types of collision insurance: limited, standard, and broad form. Limited collision insurance only pays to repair or replace the policyholder's...