Is There a Rule of Thumb for When to Buy Collision Insurance?

CarInsurance.com recommends that you buy collision insurance if:

  • Your car is under 10 years old, or
  • Your car is worth more than $3,000, regardless of age, or
  • Repairing or replacing your car is not financially feasible for you.

Is There a Rule of Thumb for When to Drop Collision Insurance?

The same experts recommend that you think about dropping your collision insurance if your maximum possible payoff (the full value of your car minus your deductible) is not more than 10 times the cost of your annual collision premiums. In other words, it may not be worth it to pay $300 in annual premiums for an older car that has a maximum possible payoff of $2,500 (full value of the vehicle is $3,000, and the deductible is $1,000). You should not, however, drop collision coverage until you have paid off your auto loan.

Another rule of thumb for dropping coverage is to add up the cost of your comprehensive and collision coverage and your deductible. If the total is higher than what your car is worth, it may be time to drop the extra coverage. For example, if your combined collision and comprehensive coverage cost $500 a year, and you have a $1,000 deductible on an old, high-mileage car that has been in car accidents, the Blue Book value of the vehicle might be below $1,500. If so, it may not make financial sense to carry collision.

Jason R. Schultz
Helping Georgia area residents with car accident, medical malpractice, and personal injury claims since 1991.