When Should I Drop Comprehensive and Collision Coverage?

As the cost of car insurance continues to rise, you might be looking for ways to save on coverage. Dropping comprehensive and collision from your policy is one way to bring down your premiums. But this option comes with risks that might not be worth taking. How can you know if it’s worth it for you?

Before you change your policy, consider the rule and risks for dropping comprehensive and collision. In this article, you’ll find answers to frequently asked questions including:

• How To Calculate When To Drop Coverages
• Risks of Dropping Coverages
• What Does Comprehensive Insurance Cover?
• What Does Collision Insurance Cover?

When Should I Drop Comprehensive and Collision Coverage?

Depending on where you live, there are different rules for how much car insurance you're required to keep. But there aren't any requirements for comprehensive or collision. If you're thinking about dropping them, here's what money expert Clark Howard has to say:

"If the value of the vehicle has dropped and fits the ten rule, then normally it makes sense to drop collision and comprehensive. But it means you are the insurance company."

So, what is the ten rule and what does it mean for you to be the insurance company? The ten rule is this: Once the value of your vehicle is less than ten times what its insurance premiums are, it's more economical to drop comprehensive and collision coverage than to pay for them.

If you're a percent person, here's another way to think of it: Is what you pay annually for comprehensive and collision coverage more than 10% of your car's value? If so, then consider dropping the coverages.

How To Calculate When To Drop Comprehensive and Collision

You can use this formula to calculate for yourself:

Consider a car that’s worth $3,000. Once the cost of comprehensive and collision goes above $300 per year, it might no longer be economical to keep them.

According to Insurance.com, the average annual cost for comprehensive is $263 while collision averages at $723 annually.

Risks of Dropping Comprehensive and Collision

As Clark points out, you become your own insurance when you drop comprehensive and collision. This simply means that if you take on the responsibility of paying for damages related to events typically covered by comprehensive and collision.

With this in mind, one risk is that you can't depend on your insurance company to cut you a check after certain types of accidents. But that also means you don't have to worry about paying a deductible first.

You can read more about what comprehensive and collision cover below to get an idea of what types of accidents might require you to pay out of pocket. If you don't have an emergency fund or enough to repair or replace your car, ignore the ten rule and keep your comprehensive and collision.

Another risk to consider is other drivers who don’t have car insurance. Clark says:

One way to avoid taking on this risk is to have uninsured/underinsured (UM/UIM) motorist coverage.

What Does Comprehensive Insurance Cover?

Comprehensive coverage protects your car from damages or loss caused by events other than car accidents (or collisions). Basically, if you drop comprehensive coverage then you become responsible for repairing your car after non-collision events.

This could include damages or loss caused by things like:

• Falling objects
• Fire
• Theft
• Vandalism
• Weather events (ex: hail, tornado, storm-related water damages, etc.)

If, for example, your windshield gets severely damaged by a flying rock on the freeway then your insurance would not pay anything towards repairs.

What Does Collision Insurance Cover?

Collision coverage protects your car from damages or loss caused by collisions. This includes:

• Collisions with other vehicles
• Collisions with objects (ex: mailbox, fence, street light, etc.)
• Collisions while parked

Let’s say somebody hits your car in a parking lot. If they flee the scene, collision coverage can help pay for damages since it includes collisions while your car is parked.

Final Thoughts

Once your car has depreciated to a certain point, it might not make sense to keep paying for comprehensive and collision insurance. But before you drop any coverage from your car insurance, make sure you’re prepared to pay out-of-pocket in the event of an emergency.

If you can’t cover the costs or repairing or replacing your vehicle in a moment’s notice, then you might want to keep the extra coverage. And whether you drop or keep the coverage, it’s a good idea to have UM/UIM protection on your policy!

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