When to Drop Collision Insurance

Collision insurance is one type of auto insurance that covers the cost of repairing or replacing your vehicle if it is damaged in a collision. It is an optional coverage that you can add to your auto insurance policy, but is it always necessary? In this article, we will explore when it might be appropriate for you to drop collision insurance from your policy.

What is Collision Insurance?

Collision insurance is an optional coverage that pays for damage to your vehicle if it is involved in an accident with another vehicle, object, or if it rolls over. Collision coverage is not required by law, but it is often recommended for newer vehicles or vehicles that have a higher value.

If you are leasing or financing a vehicle, you may be required to have collision coverage as part of your loan or lease agreement. However, once you have paid off your loan or lease, you may have the option to drop collision coverage from your policy.

When Should You Consider Dropping Collision Insurance?

There are a few situations in which dropping collision coverage may make sense for you:

1. Your Vehicle is No Longer Worth Much

If your vehicle is older or has depreciated in value, the cost of repairing it after an accident may not be worth the cost of the collision insurance premiums. In this scenario, you may consider dropping collision coverage and using that money to save up for a new vehicle instead.

For example, if your vehicle is worth $2,000 and collision coverage costs you $500 a year, it may make more sense to forego the coverage and simply put that $500 a year into a savings account until you can afford to purchase a new car outright.

2. You Have a High Deductible

Collision insurance typically comes with a deductible, which is the amount you have to pay out of pocket before your insurance kicks in. If you have a high deductible, such as $1,000 or more, it may not be worth it to keep collision coverage.

In this scenario, you may wish to drop collision coverage and use the money to build up an emergency fund to cover the cost of any potential accidents or repairs.

3. You Have Multiple Vehicles

If you have multiple vehicles, you may wish to drop collision coverage on one or more of them to save on insurance premiums. You can choose to keep collision coverage on your primary or most valuable vehicle, while dropping it on older or less valuable vehicles.

When Should You Keep Collision Insurance?

There are also situations in which keeping collision insurance may be a good idea:

1. You Have a Newer or More Valuable Vehicle

If you own a newer or more valuable vehicle, collision insurance may be worth the cost. Repairing or replacing a newer, more expensive vehicle can be costly, and collision coverage can help protect you from those expenses.

2. You Live in an Area with a High Risk of Accidents or Vandalism

If you live in an area with a high risk of accidents or vandalism, collision coverage can help protect you from those potential costs. Keep in mind, however, that if you live in an area with a high risk of accidents or theft, your insurance premiums may be higher overall.

3. You Cannot Afford to Replace Your Vehicle Outright

If you cannot afford to replace your vehicle outright, it may be worth keeping collision coverage to ensure that you have the funds to repair or replace your vehicle if it is damaged in an accident.

FAQ on Dropping Collision Insurance

Conclusion

Dropping collision coverage from your auto insurance policy can be a good way to save money on your insurance premiums. However, it is important to consider your vehicle’s value and your ability to pay for repairs or replacements out of pocket before making a decision. If you are unsure whether or not to drop collision coverage, speak with your insurance agent to discuss your options.