When should I take collision off my car insurance?

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Here's what you need to know...
  • A basic auto insurance policy includes only liability coverage and whatever else is required by the state
  • Collision insurance is an optional form of physical damage coverage that pays for vehicle repairs or replacement when it’s damaged in a collision with another object
  • While collision insurance isn’t required by law, policyholders who are financing or leasing their car must maintain full coverage on it until the contract ends
  • If you own your vehicle outright and you don’t have to answer to a lender, you’re free to remove collision without having to worry about expensive forced-placed insurance charges
  • The general rule of thumb is to keep collision until the premiums are more than 10 percent of the car’s fair market value


Not all insurance policies protect the vehicle that you own. If you’re building a policy, it’s important to recognize that a basic insurance policy will provide protection for someone else’s property but not your own.Not all insurance policies protect the vehicle that you own.

If you’re building a policy, it’s important to recognize that a basic insurance policy will provide protection for someone else’s property but not your own.

If you want some financial relief following an accident, you must carry optional forms of insurance like collision coverage.

Having a full coverage policy is great when you need it, but that protection comes at a cost. Even with the higher cost, data released by National Association of Insurance Commissioners shows that about seventy-two percent of policyholders carry full coverage.

If you’re looking to cut costs on your auto insurance expenditures, here’s what you should know before you drop collision and shop around.

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What’s the difference between Property Damage coverage and Physical Damage coverage?

It’s easy to get some of the loads of insurance terms that you need to know mixed up when you’re shopping for insurance.

While Physical Damage coverage and Property Damage coverage sound like two terms that can be used interchangeably, they actually aren’t. It’s differentiating the two that will help as you shop around for insurance.

Understanding How Physical Damage Coverage Works

In the world of auto insurance, Physical Damage consists of both comprehensive and collision coverage options. Collision covers your vehicle when it collides with another object like a car, a telephone pole, or a fence.

Comprehensive is called Other Than Collision because it covers you against damage that’s not covered under collision like fire, theft and hail.

No fixed limit says how much your insurer will pay for repairs. If you file a claim to cover damages to your vehicle, your insurer will assess the damage and estimate the repair costs.

After the adjuster does this, they will compare the costs to the Actual Cash Value of your vehicle. The policy will only pay up to this amount.

Am I required to carry comprehensive and collision?

While there’s no universal definition for a full coverage auto policy, all plans with full coverage have both comprehensive and collision. You’re never required under state law to carry full coverage.

If you decide not to buy full coverage, you won’t be penalized by the state in any way.

Just because the state doesn’t require you to carry full coverage doesn’t mean that you don’t have the obligation to purchase it.

If you’re still paying off an auto loan, you can’t drop full coverage until you get a notice saying the loan is paid off, which is also true when you’re leasing a car.

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What happens if you drop your full coverage too early?

There’s always a consequence when you don’t obey the rules. You don’t have to worry about the state-assessed penalties; you do have to worry about the penalties that are assessed under your loan or lease contract.

Since it’s your legal obligation to protect the collateral on the contract, the lender has the right to take action.

When you drop your full coverage while you’re still under contract, your lender is entitled to purchase forced-placed insurance and charge you for it. While you might think this insurance protects you, it doesn’t.

Instead of paying for all claims that are presented, it will only pay the lender when your car is totaled.

How much is collision?

The cost of collision coverage varies from person to person and company to company. To get the actual cost for your collision coverage, you must get a personalized quote for insurance.

It can help, however, to look at the average insurance expenditures to see if the cost of coverage is exorbitant. The average consumer spends $296.99 per year on collision insurance.

What factors can affect your collision rates?

Collision doesn’t have to cost you around $25 per month. There are instances where the cost of coverage will be much less, but there are also cases where it will be higher.

It all depends on the rating factors that are used to project risk and claims trends. Here are some factors that can affect your collision rates:

  • Age of driver and years of driving experience
  • Gender and marital status
  • Vehicle type, size and body style
  • Car safety rating
  • Claims history
  • Previous moving violations
  • Vehicle usage and annual mileage
  • Credit insurance score
  • Whether or not your vehicle has an active or passive alarm system

The 10 Percent Rule

If you’re still not sure if you should pay the extra money for collision coverage, it can help to learn the 10 percent rule.

As a rule of thumb, it’s best to cut the cost of collision when your annual premiums for collision are more than 10 percent of the fair market value of your car.

This rule is only valid if you can afford to replace your vehicle.

The only way to see if your premiums are too high to justify the cost for collision coverage is to get insurance quotes. Start by entering your information in a comparison shopping tool.

Once you have instant quotes to compare, see how much your collision insurance will cost you. Then, look up the fair market value of your car and see how the price and value compare.

Start comparing car insurance rates now by entering your zip code in our FREE tool below!

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