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Do I need comprehensive and collision insurance?


Scissors with moneyInsurance is meant to cover what you can't afford to replace.

That means coverage on an old car that isn't worth much isn't a good expense, says personal finance expert Kathy Kristof.

"If you're driving a beater car that really isn't worth a whole lot of money, having collision and comprehensive probably isn't worth it," Kristof says. The money could be better spent in a savings account for another car, she says.

The costs of collision and comprehensive coverage, which repair or replace your car if you are at fault in an accident or the car is stolen or vandalized, are largely dependent on the car's value. No matter how much you pay for comprehensive and collision coverage, your insurance company will pay out only what the car is worth, minus your deductible.

Many drivers do the math and decide to drop the coverage. The share of vehicles 10 years old or older without comprehensive and collision coverage was about 63 percent in 2010, according to insurance analyst Quality Planning. In 2011, the breakdown by model year for newer cars looked like this, according to data drawn from CarInsurance.com's quote-comparison engine:

  • 1999:     69 percent
  • 2000:     65 percent
  • 2001:     61 percent
  • 2002:     56 percent
  • 2003:     51 percent
  • 2004:     45 percent
  • 2005:     36 percent
  • 2006:     31 percent
  • 2007:     27 percent
  • 2008:     24 percent
  • 2009:     22 percent

Insurance to cover your liability usually costs much more than insurance to cover your car, so the potential savings in many cases may not be large. The numbers should be spelled out on your insurance policy's declarations page.

Run the numbers

There is no firm rule on when to drop coverage.

For example, a 2002 Chevrolet Impala LS in good condition is worth about $3,650, according to Kelley Blue Book. A 40-year-old Delaware driver with a clean record would pay about $242 a year for comprehensive and collision coverage with a $500 deductible.

Should he forgo the collision and comprehensive coverages?

MSN Money's Liz Weston suggests dropping the additional coverages when the premiums reach 10 percent or more of the potential payoff. In this case, the $242 premium doesn't quite meet the threshold.

CarInsurance.com consumer analyst Penny Gusner says she looks less at the cost of coverage than at the value of the car. "If you wouldn't repair it for a major mechanical issue, you probably shouldn't insure it for comprehensive and collision," she says.

Her general guidelines for coverage as cars grow older:

  • Maintain full coverage with manageable deductibles until your car has been paid off.
  • Build your emergency savings, then raise your deductibles.
  • Drop comprehensive and collision when you would buy another car rather than fix the one you have.

A car repair that costs what your premiums and deductible total is a good barometer, Gusner says. If you would simply buy a newer car, don't insure the old one for comprehensive and collision.

Kristof puts the tipping point on dropping physical damages coverages at about $2,000. At that point, the savings should go into an emergency fund toward another car, she says.

Can you drop collision only?

Because comprehensive coverage is a comparatively small percentage of the overall premium tab and covers a lot of events, it may be worth keeping, says Michael Barry, spokesperson for the Insurance Information Institute.

Farmers Insurance agent Cristofer Pereyra of Phoenix also recommends keeping some form of comprehensive coverage if possible. One of the most common insurance claims is for glass damage, he says, such as when a rock hits a windshield.

Insurance companies prefer that collision and comprehensive coverage be purchased together, but some will allow customers to buy one without the other, Gusner says. It's typically more difficult to obtain comprehensive without collision coverage than just collision on its own, she says.


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9 Responses to "Do I need comprehensive and collision insurance?"
  1. Firebird

    My 2005 Honda Civic is worth $5,300 if I were to sell it privately, $4,200 if I were to trade it in. I have no real option financially to buy a new or used car on my own should something happen to this one.

  2. Sue

    I think it's possible to purchase comp without buying collision but don't believe you can buy collision without comp.

  3. Audrey

    I'm 58, never had a ticket since I received my license in 1975, nor have I had an accident. Yet, I seem to pay a lot for car insurance. I have relatives and know of others that have had DUIs, many ticket, etc. and they seem to pay much less. I just don't understand how or why and my rates with my current insurer doesn't decrease. I will consider another company that awards safe drivers.

  4. Kathy

    Thanks for the helpful information. I figured out it's time to drop comp and collision and just save the money towards a new car.

  5. Randy Miller

    There is no rule of thumb or formula to use for the general public for dropping physical damage coverage. I have been selling car insurance for 35 years and each person's situation is different. The unfortunate part of this is the lower income people that need to save the money are the ones that should keep physical damage longer. It can create a real hardship if the vehicle to totaled out and they don't have the money to replace it. I have had several claims where my insured was run into and the driver that caused the damage had no insurance and didn't have any money to pay for the damage to my customers car. My insured had dropped their physical damage coverage because they had gone for over 25 years without having an at fault accident and were out $3,000 to $5,000 for their vehicle.

  6. John Graham

    It says that dropping comp and collision is okay IF you have more than one car or you can afford to buy another car on your own. The little money you save by dropping comp and collision will not buy you another car.

  7. Monica

    I have a 2000 Nissan Altima and am paying $980 annually without comprehensive coverage. I am not too sure collision is included or not and am not currently at home to review the policy. Additionally, I am getting a discount for multi-bundle insurance because my home insurance is with the same company. I think I am paying too much, do you?

    1. CharlieAnn September 30, 2013 at 11:27 AM

      You may want to reconsider comp coverage, because older vehicles are more likely to have an oil leak or electrical issue that could cause the vehicle to catch on fire. I use to handle insurance claims and was an agent for a short period of time. Comp is usually not very expensive coverage, and it's probably the only coverage that isn't rated based on your driving record.

        Reply »  
    2. Jamie April 25, 2013 at 6:07 PM

      Monica -- It actually matters, if you have collision coverage or not when asking if $980 annually is to high to pay. Your driving record matters, as well as anyone listed on your policy as a driver, your age, how you use the car (pleasure use, commute and distance you commute),and, depending on what state you live in, your credit score can matter as well. Your coverage limits also matter, do you have $20,000, or $50,000 or $100,000 liability limits? There are a lot of factors to look at.

        Reply »  
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