Deciding when to drop comprehensive and collision insurance depends on several factors. The table below outlines key considerations to help you determine if keeping these coverages makes sense.
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When Should You Drop Collision and Comprehensive Coverage?
Updated: April 15, 2025
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Key Takeaways
Collision insurance covers your car's repair costs if you crash with another vehicle or a stationary object. It also allows reimbursement up to your car's actual cash value (ACV).
Comprehensive covers noncollision events like theft, vandalism, natural disasters and animal-related damage.
Neither collision nor comprehensive insurance is required by law. Your car's ACV can help you decide whether to keep or drop these coverages.
When to Drop Comprehensive and Collision Coverage
Scenario | Reasoning |
|---|---|
Your collision premiums exceed your car’s actual cash value (ACV). | Cars lose value as soon as you drive them off the lot. Knowing your car's ACV is essential. For example, consider dropping collision coverage if you have an older model worth $1,750 but pay over $2,000 in premiums. |
You can afford to pay for damages out of pocket. | Collision insurance covers repair costs after a crash, but it may be unnecessary if you can afford to pay for these expenses out of pocket. |
If you have a loan or lease, you must maintain both collision and comprehensive coverage. But if you own your car outright and it's older, you might save money by dropping one or both coverages, depending on your situation.
HOW TO DETERMINE A CAR’S ACTUAL CASH VALUE
How much your car is worth today is known as its actual cash value (ACV). To get your car’s ACV, subtract depreciation from its replacement cost. Kelly Blue Book can help you determine the depreciation amount.
Several factors affect your ACV, including:
- Your car’s year, make and model
- Mileage
- Wear and tear
- Collision history
Knowing your car’s present value is key to deciding when to drop collision insurance coverage.
What Is Comprehensive and Collision Insurance?
Comprehensive and collision insurance helps pay for damage to your car but covers different situations.
Collision insurance covers repairs or replacement if you crash into another car or object, such as a fence or tree. Comprehensive insurance covers noncollision events like theft, vandalism, fire or natural disasters.
Collision insurance may increase your rates, but choosing a deductible of at least $500 can reduce expenses. Collision coverage typically goes together with comprehensive insurance; most insurers offer them as part of a full coverage policy.
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Collision insurance covers collisions in which a driver is at fault. Comprehensive insurance covers damage to your vehicle caused by noncollision incidents like natural disasters, fire or theft.
Neither collision nor comprehensive coverage is required by law.
Do You Need Comprehensive and Collision Coverage?
While collision insurance may raise your premiums by at least $500, keeping this coverage can help lower expenses in the long run in certain situations. These include owning an expensive vehicle or financing your car. Collision insurance may also be a good idea if you live in a state with many uninsured motorists.
Scenario | Reasoning |
|---|---|
You’re still paying off your car loan. | Most lenders require full coverage insurance while you’re paying off a car loan. Collision insurance protects their asset in case of a crash. |
Your car is expensive. | High-value cars often have costly repairs. If you can’t afford to pay for these out of pocket, carrying collision coverage can help protect your finances. |
You can’t afford a new car. | If your car is totaled after a crash, collision insurance can help you buy a replacement vehicle equal to its actual cash value. |
You have only one car. | If you have only one car, repairing it quickly after an accident is essential. Collision insurance can help avoid delays by covering repair costs promptly. |
You worry about being hit by an uninsured driver. | At-fault drivers are liable for the damage they cause in a collision, including medical bills and vehicle repairs. However, if a driver is uninsured, they have no coverage to pay for your expenses. You may be left paying for repairs out of pocket without collision insurance. |
How to Save On Your Car Insurance Premium
If you decide collision insurance is necessary, you'll likely pay a higher premium. Fortunately, there are several other ways to save on costs.
Here are five practical techniques to reduce your car insurance premiums:
- 1
Raise your deductible
Your deductible is the amount you pay before insurance coverage begins. When purchasing a policy, you have several deductible options. Generally, a higher deductible means a lower monthly premium.
- 2
Change your coverage and seek out discounts
Different insurance companies offer different rates for the same vehicle. Getting online quotes from multiple insurers helps you find lower premiums through comparison shopping.
- 3
Bundle your auto and home insurance
If you have homeowners insurance, check if your provider also offers car insurance. Most insurers offer a discount for bundling these policies, helping you save money over time.
- 4
Improve your credit score
Insurers consider several factors when setting premiums, including your credit score. Drivers with good to excellent credit get significantly lower premiums than those with poor credit. Improving your credit score takes time but can substantially decrease your car insurance costs.
- 5
Take a defensive driving course
Safe drivers typically pay lower premiums. Some insurers offer discounts if you voluntarily complete a defensive driving course. Check which traffic schools your insurance company approves and take a course through one of them to get the discount.
- 6
Pay in full
Many insurance companies offer discounts if you pay upfront and in full. While no-down-payment car insurance allows the lowest initial payment, you can ultimately save by paying in full.
When to Drop Comprehensive and Collision Coverage: Bottom Line
Deciding when to drop collision and comprehensive coverage depends on your car’s actual cash value (ACV) and your financial situation. If your car’s ACV is low and coverage costs exceed 10% of its value, dropping these coverages may be a wise choice. However, if you’re financing or leasing, these coverages are usually required. This article outlines key factors to help you decide if keeping or dropping these coverages makes financial sense.
Do You Need Comprehensive and Collision Coverage: FAQ
Deciding when to drop collision and comprehensive coverage depends on your car’s value and insurance costs. This section answers common questions to help you make the right choice.
When is it a good idea to drop collision insurance?
If your premiums exceed your car’s actual cash value or you can afford to pay for damages out of pocket, you may want to remove collision coverage from your policy.
When do I need collision insurance?
Collision insurance offers valuable protection for an expensive car. If you live in a state with many uninsured drivers, it can provide financial security. Also, most lenders require collision coverage if you're still paying off your car.
How do I determine my car’s actual cash value (ACV)?
Your car’s worth is computed as:
repair/replacement cost - depreciation = ACV. You can use the Kelly Blue Book to determine how much your car has depreciated.
What happens if I get into an accident with an uninsured driver?
If the at-fault driver is uninsured and you don't have collision coverage, you might pay for your car repairs out of pocket.
Does collision insurance cover total loss?
Your collision coverage can buy you another car worth your totaled vehicle's ACV.
Comprehensive and Collision Coverage: Our Review Methodology
MoneyGeek gathers car insurance data from various providers and independent agencies. Our analysis also includes consumer analytics and provider ratings from trusted sources, such as:
- J.D. Power: A respected consumer research agency that ranks and reviews customer satisfaction in the insurance and personal finance industries
- AM Best: A credit rating agency that evaluates insurance companies financial strength
- Quadrant Information Services: A leading provider of comparative data for pricing analytics in property and casualty insurance
- National Association of Insurance Commissioners (NAIC): A regulatory body offering expertise and data analysis to protect consumers and regulate the insurance industry
Our content also benefits from insights from industry professionals and academics in insurance, personal finance and other fields. Our expert team includes:
- Zach Shefska: Founder and CEO, Your Auto Advocate
- Kalinda Ukanwa, MBA, Ph.D.: Assistant Professor of Marketing, University of Southern California
- Karen Gordon Mills: Senior Fellow at Harvard Business School, an expert in U.S. competitiveness, entrepreneurship and innovation
At MoneyGeek, your needs are a priority. Our editorial process includes research, fact-checking and a thorough review to ensure the accuracy and credibility of our content.
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About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.
sources
- Kelley Blue Book. "What is Cost to Own?." Accessed April 15, 2025.