When to Drop Collision on Your Auto Insurance

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by Daniel McClain on Dec 30, 2016

Collision Auto Insurance: Do You Need It?

When it comes to auto insurance, it is generally a good idea to have as much of it as you can afford so that you and your family will be protected should an accident or incident occur. Typically, full coverage includes liability, comprehensive, and collision insurance.


However, only liability insurance is required in order to drive a vehicle in The United States. Both comprehensive and collision insurance are optional coverages in all states that you may or may not want to purchase for your vehicle.


Let’s focus on collision insurance today and take a look at the scenarios in which it is right for you and also scenarios in which it isn’t. If you decide it is a good idea for you to take a pass on this option, you can save yourself some cash.

What It Covers

Collision insurance cover the cost of repairs to your own car when it has been damaged in an accident. This includes accidents involving other cars or inanimate objects such as a tree or fence. Typically, the insurance company will pay for repairs up to the blue book value of your car, minus your deductible.


For example, if repairs cost $3,000 and you pay your deductible of $1,000, you will be reimbursed $2,000 for repairs (as long as the value of your car is more than $3,000).


Generally, you will only make a claim on your collision coverage if you were at fault for the damage. However, it may be possible to make a claim on your own insurance if the other at-fault driver is uninsured, if their insurance company is slow to act, or if the damage was caused by a hit-and-run.


Also, if you do not have comprehensive auto insurance, you can typically make a claim on your collision insurance for acts of nature, vandalism, and theft.


However, when you use collision insurance for any claim other than an accident of your own doing, you do run the risk of having your rates increased. That is why it is wise to also purchase comprehensive and underinsured motorist coverage.

Why You Might Want It

The following scenarios illustrate reasons why you might want to purchase collision insurance:


  • You are paying off an auto loan and your lender requires you to have it.


  • Your car is fairly new or pricey to repair or replace.


  • You drive in an area that has a high incidence of collisions. This can include a congested freeway commute, annual winter storm weather, or winding roads with blind curves, for example.


  • You feel unprotected and vulnerable due to the fact that you may need to pay an unexpected out-of-pocket lump sum to repair or replace your car should you get in an accident.

What It Costs

Your monthly premium cost is dependent on a number of factors.


The first is your vehicle. If you are insuring either a luxury make or a new model, you will want more insurance coverage to protect yourself financially should your vehicle be involved in an accident. Take into consideration how much you still owe on your auto loan, the cost of repairs for your specific make and model, and the replacement costs should you suffer a total loss.


The second is the amount of your deductible. The range from which you can choose is typically between $250 to $1,000. The lower your deductible, the higher your monthly premium. The higher your deductible, the lower your monthly premium.


The third is your driving record. If you have multiple speeding tickets or a DUI, your rates will be significantly higher.


The fourth is the insurance company you use. Shop around and compare prices. Read the fine print. Make sure you understand everything before you give them your signature.


Finally, if you have had prior auto insurance claims, it may cost you more to get insured.

Why You Might Not Need It

The following scenarios illustrate reasons why you might NOT want to purchase collision insurance:


  • You own your car outright.


  • Your car’s value is lower than the combined cost of your collision insurance premium and deductible.


  • You aren’t worried about needing to repair or replace your car if it is damaged.


  • You have enough of an emergency fund built up that it is possible for you to pay out-of-pocket for repair or replacement without going into financial distress.

What You Will Save

The cost of collision coverage is added on top of your liability coverage. By dropping collision, you can save at least a few hundred dollars per year, possibly more.


For more information about auto insurance coverage, contact Insurance Center Associates today!


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