The car is paid off. It has some miles on it. And every time the insurance bill comes, you wonder whether you’re still getting your money’s worth from collision and comprehensive.
It’s a fair question.
My starting point would be this: If something happened to the car tomorrow, could you afford to repair or replace it yourself?
If you could, it may be time to consider dropping collision. If losing the car would leave you scrambling to get to work or replace it, keeping coverage may still make sense.
Then we should look at comprehensive separately. You might decide to drop collision and keep comprehensive. They cover different things, and the price difference can change the conversation.
How much are you paying for collision and comprehensive?
Before we decide anything, I’d want to see four numbers:
- What the car is worth today.
- What you pay for collision.
- What you pay for comprehensive.
- Your deductible for each coverage.
Your whole insurance bill won’t tell us what we need to know. Some of that premium pays for liability and other protection you would still carry.
We need to look at the cost of the coverage you’re thinking about removing.
And if the car is financed or leased, check that agreement first. It may require you to keep collision and comprehensive.
When would I consider dropping collision?
Collision generally helps pay for covered damage to your car from a crash, after your deductible.
As the car loses value, the amount of protection you’re buying gets smaller. That’s when it’s worth looking at the premium again.
Let’s look at a simple example. These numbers are for illustration, not an actual quote.
Your car is worth about $5,000. You have a $1,000 collision deductible, and collision costs $500 a year.
For a simple total loss comparison, you’re paying $500 a year for roughly $4,000 of potential protection after the deductible. The actual settlement would depend on the policy and the insurer’s valuation.
Is that worth keeping?
If you have money set aside for another car, maybe you’re comfortable taking that risk yourself. If you have $800 in savings and need this car to get to work every morning, I’d be much more cautious about removing it.
Same car. Same premium. Different decision.
That’s why I wouldn’t tell you to drop collision just because your car is ten years old. I’d want to know what losing it would mean for you.
Does the 10% rule help you decide when to drop collision?
You may have heard that you should reconsider coverage when the annual premium reaches about 10% of the car’s value. The Insurance Information Institute offers a similar guideline for older vehicles.
In our example, $500 a year on a $5,000 car gets us to 10%.
That’s a good reason to stop and look at the numbers. It isn’t a reason to automatically cancel coverage.
The rule doesn’t know what’s in your savings account. It doesn’t know whether you have another car, or whether replacing this one would mean taking on a payment you can’t comfortably afford.
Use it as a starting point. Then look at your situation.
Should you drop comprehensive too?
Maybe. But I wouldn’t lump them together.
Comprehensive generally helps with covered losses such as theft, hail, fire, falling objects and animal damage.
Let’s stick with the $5,000 car from our example.
Suppose comprehensive costs $120 a year, and the deductible is $500. For a simple covered total loss comparison, that leaves about $4,500 after the deductible.
Now we’re having a different conversation.
You might look at $500 a year for collision and decide you’re ready to take that risk yourself. But $120 a year to keep comprehensive might be something you’re comfortable paying.
Neither answer is automatic. We should look at the cost and protection separately, then check which combinations are available on your policy.
Paying off the car doesn’t mean you should drop coverage
Getting rid of a car payment feels good. I understand wanting to get rid of another expense while you’re at it.
But a paid off car still has value. And if it’s totaled, replacing it could put you right back into a monthly payment.
Before removing coverage, think about how you would handle that.
Would you use savings? Buy something less expensive? Share another household vehicle for a while?
If you have a workable answer, dropping coverage may be reasonable. If you’re counting on nothing happening, I’d give it another look.
What about raising the deductible?
That’s worth comparing before you remove coverage entirely.
A higher deductible may lower the premium, but I’d want to see the actual savings and make sure you could handle the larger deductible.
Here’s another simple example.
You increase your deductible from $500 to $1,000, and it saves $100 a year.
You’re agreeing to pay another $500 after a covered loss. It would take five years of those savings to equal the extra deductible, assuming the savings stayed the same.
You might be perfectly comfortable with that. Or you might decide $100 a year isn’t enough to make the change worthwhile.
Either way, let’s look at the quote before deciding. “Higher deductible” doesn’t tell us how much you’ll save.
What happens if you drop collision?
You’re taking on the risk of damage that your collision coverage would otherwise cover.
I wouldn’t make that decision assuming someone else’s insurance will always pay. Sometimes fault is disputed. Sometimes the other driver doesn’t have insurance. Sometimes there isn’t another driver involved.
We should also check any uninsured motorist property damage coverage you have and how it applies. Don’t assume it takes the place of collision.
And before making the change, ask whether it affects other options on your policy, such as rental reimbursement. You want to understand the whole change, not just the smaller bill.
How do you figure out what the car is worth?
Start with a vehicle valuation tool and look at comparable vehicles. Use your actual mileage, condition, trim and equipment.
That gives us a starting point for the conversation. It doesn’t guarantee what an insurer would pay after a claim.
What you paid for the car years ago isn’t the number we need today. We need a reasonable estimate of its current value.
Compare keeping coverage, raising deductibles and dropping coverage
If you’re wondering whether to drop coverage, we can look at a few options:
- Keep what you have.
- Change the deductibles.
- Drop collision and keep comprehensive, if available.
- Remove both, if that fits your situation and any financing requirements.
Then we can see what each change would actually save.
Sometimes the savings are worth it. Sometimes you find out you’d be giving up more protection than you expected for a pretty small difference in price.
Call us at (937) 550-9596 or book a conversation. Bring your current policy and vehicle details, and we’ll walk through it with you.
You can also use our auto insurance page to see how to share your current coverage.
The goal is to make a choice you understand and can afford to live with if something happens.
Coverage and claim payments depend on your policy’s terms, limits, deductibles and exclusions. Confirm any changes and their effective date with our team.