Auto Insurance – When Should You Drop Collision and Comprehensive Coverage?

April 26, 2007

Lenders require car owners to carry collision and comprehensive insurance coverage on their vehicles as long as there is a lien against them (meaning, while they are being paid off). Then, once the vehicle is paid for, it is usually up to the insured to choose whether or not to carry the extra insurance. I’m blogging about this because our Buick will be paid off in June, which means there will no longer be a lien against it and we will be free to drop our comprehensive coverage and collision insurance.

Since our Buick is still worth $10,000 – $12,000 and the premium for collision and comprehensive coverage is only $425 per year (with a $1,000 deductible) it’s a no-brainer to keep the coverage. I will probably keep the coverage until the value of the car is around $3,000. Why $3,000? It just seems like a good number to me. It’s low enough that we could cover it out of our savings. In other words, if something happened to our car when it was worth $3,000, it wouldn’t put us in financial strain to pay for it out of savings.

I dropped both comprehensive and collision on our Honda Civic last year, which reduced our premium by nearly $500. It’s nice to have an emergency fund!

55 responses to Auto Insurance – When Should You Drop Collision and Comprehensive Coverage?

  1. Instead the insurance company will “total” the car and pay you well below market value. This means that with collsion and comprehensive after the loan is paid off, you are basically paying for NOTHING. I say, drop it once the car is six or seven years old. It’s not worth it!A fourth factor is determining the financial impact of having to come out of pocket should something happen. If you have a few thousand dollars in savings earmarked for such a purpose, then an accident may result in being no more than an inconvenience,
    In other words, your vehicles value may decline at a faster rate than your premium. For example, consider a vehicle that was worth $8,000 three months ago but worth only $7,000 now. Now consider that your premium hasn’t changed.
    Home Insurance

  2. Auto insurance veries a lot between companies also. I pay around $525 every 6 months and insure 2 cars and a motorhome. $500 deductable on full coverage. I have shopped around looking for that $450 a year savings and have not found any other company that is even close to what I pay. I am insured by Safeco and have carried it for a lot of years. I have not had any accidents for over 15 years. The rpemiums drop every year a little for several years then stop dropping. I have one car paid off but the other is new in 2009 and the motorhome will not pay off for another 9 years. I’ll keep my coverage on my paid off one until its value drops to $5000.

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  5. Wow,
    Can not get over how many people got sucked into the $1000 deductible , when I questioned my insurance company they said that it only changed my policy rate by $200 a year, ($100 for a six month policy) One collision my fault or not and I am down an extra $300, .However on the point of carrying collision, It really matters more on your financial situation , if you depend of the vehicle and cannot lay out more money on a new car , keep the collision, the extra $300-400 you spend a year keeps you in a car if something happens, and have at least a $40 dollar a day rental reimbursement.