Why You Could Drop Collision and Comprehensive Coverage

Most states require a mandatory minimum of liability insurance if you’re a licensed driver with a car. But if you’re financing or leasing one, the lender may also make you carry collision and comprehensive coverage.

Even if you own a vehicle outright (that is, it’s completely paid off), it still makes sense to carry collision and comprehensive insurance for your own benefit. They’re part of what’s called full-coverage car insurance. They can be really important if your vehicle is involved in a wreck, stolen, vandalized or otherwise damaged.

Unfortunately, collision and comprehensive coverage also make car insurance premiums much more expensive. If the rising cost of car insurance (up more than 20% in the last year) has you looking for ways to reduce your premiums, you might have considered dropping collision and comprehensive coverage.

But is that the best move? We’ll explore what collision and comprehensive insurance are, how much they cost and when it might be OK to remove them from your policy.

What Are Collision and Comprehensive Coverage, and Why Are They Important?

Collision and comprehensive coverage are part of a full-coverage policy. They cover damage to your vehicle, regardless of fault.

• Collision insurance covers damage to your vehicle caused by a collision. This could be another vehicle or non-animal objects, such as a fence, pole or tree. It does not matter who is at fault for the collision.
• Comprehensive insurance covers damage to your car caused by any other sources, including storm damage, falling objects, vandalism or theft. It also covers collisions with animals, such as deer.

Keep in mind, with both collision and comprehensive coverage, you’ll have to pay a deductible before it kicks in.

Why are these policies important? State minimum liability insurance only applies if you cause an accident. And it only pays for damage to other vehicles and injuries to other drivers and passengers. It does not cover you and your own vehicle. Comprehensive and collision, on the other hand, can cover damage to your own vehicle, even if you’re at fault.

Other common car insurance coverage types to consider for a full-coverage policy are:

• Uninsured or underinsured motorist coverage, in case you’re involved in a wreck with a driver without insurance or are the victim of a hit-and-run.
• Personal injury protection (PIP) or medical payments, to cover you and your passengers in the event you’re injured in an accident, regardless of fault.

Should You Drop Them From Your Car Insurance Policy?

Collision and comprehensive policies are fantastic in the event your vehicle is damaged. However, they also drive up the cost of your monthly car insurance premium. So it’s possible you’re wondering if you can drop them altogether.

The answer? It depends (and usually you shouldn’t).

When It’s OK to Drop Collision and Comprehensive

The easy answer: You can drop collision and comprehensive at any time, as long as it’s not mandated by a financing or lease agreement. However, even after you’ve paid off your car, it’s usually a good idea to hold off dropping them unless:

• Your car has depreciated significantly. If your car is so old and run-down that it’s likely only worth $1,000 or so, it probably doesn’t make sense to keep comprehensive and collision coverage. This is especially true if your deductible is almost as high as the value of the vehicle. Just be aware that you could be on the hook financially if you wreck your car or it gets vandalized or stolen.
• You’ve got a sizable emergency fund. If you have money socked away in a high-yield savings account to cover emergency expenses, you can theoretically drop them. It’s a huge risk: It’ll save you roughly $750 a year to drop the coverage, but you’ll spend a lot more if your vehicle is damaged in an event that would ordinarily be covered by comp or collision.
• You don’t drive the vehicle. If you won’t be driving your car for a period of time — like if you’re traveling out of the country for several months or have a company vehicle you’ll exclusively be using — but you want to hold on to your car for the time being, you can consider dropping collision insurance. You should still keep comprehensive, in case it’s damaged in a flood, fire or storm, or gets stolen.

How Much Does Collision and Comprehensive Coverage Cost?

How much insurance costs depends on several factors, including your age and gender, the car you drive, your driving record and where you live. In some states, credit scores can also impact your insurance rates.

That said, the National Association of Insurance Commissioners (NAIC) released a study earlier this year with average car insurance rates from 2017 to 2021. Using this data and adjusting for ABC News’ unprecedented 36% inflationary increase in car insurance rates since 2020, we’ve calculated the average costs of both collision and comprehensive insurance:

Type of coverage	Monthly premium	Annual premium
Collision	$42.00	$503.99
Comprehensive	$20.38	$244.58

Thus, the monthly cost to include both collision and comprehensive insurance on a policy is $62.38, The annual cost of collision and comprehensive insurance is $748.57.

4 Steps to Lower the Cost

It’s no secret collision and comprehensive coverage are a significant cost for drivers of all ages. If you’re hesitant to drop these coverages but need to lower your premiums, try these steps:

• • Reduce your coverage limits: Your comprehensive and collision policies have coverage limits. These are max payouts you’ll get from the insurance company, regardless of what your final bill is. By lowering the coverage limits, your rates will go down. Just keep in mind that could mean that the check your insurance provider cuts you to cover damage to your vehicle may not be enough.
  • Raise your deductibles: On the flip side, you can increase your deductible for both coverages. That means the amount you have to pay out of pocket before coverage kicks in will be greater. Make sure you have enough money in savings to cover the higher deductible; as long as you do, you can enjoy significant savings on car insurance.
  • Investigate car insurance discounts: You may be eligible for several car insurance discounts that can lower your overall rate, without having to adjust or drop coverages. Some common discounts include home and auto bundle discounts, pay-in-full discounts, safe driving discounts and paperless billing discounts.
  • Shop around for a new car insurance company: At least once every other year, we recommend comparing rates for comparable coverage at some of the other best car insurance companies. You can also use sites like Insurify, QuoteWizard and EverQuote to shop around. Chances are good you’ll find more affordable car insurance — at the same coverage level.

Timothy Moore is a personal finance writer and Certified Financial Education Instructor. He covers banks, loans, insurance and taxes for The Penny Hoarder. Find his work on sites such as USA Today, Business Insider and Forbes.