When to Drop Collision and Comprehensive Coverage

Should you drop comprehensive and collision? The answer depends on three things: your car's value, what you pay for insurance, and whether you have the savings to replace it. The reality is that most drivers should have full coverage, but these are the circumstances when you should drop collision and comprehensive: 

Rules of thumb for when to drop full coverage:

1. 10% rule: Your annual premium for collision and comprehensive exceeds 10% of what your car is worth. This is the most accurate test. Example: Your car is worth $6,000 and you pay $900 per year for collision and comprehensive. That's 15% of the car's value. Time to drop it.
2. Car value rule: Your car is worth less than $7,500. The old standard was $5,000, but with premiums running $200 to $250 per month now and repair costs climbing, that benchmark has shifted. A car worth $7,500 or less often doesn't justify the cost of coverage.
3. Savings rule: You have emergency savings to cover repairs yourself. You need to be able to handle a large repair bill without falling apart financially.
4. Ownership rule: Your car is paid off. If you're financing or leasing, your lender requires comprehensive and collision coverage. You can't drop it until the loan is paid off.

All four of these need to apply before dropping makes sense. If even one doesn't fit your situation, keep the coverage.

Knowing what you lose when you drop collision and comprehensive is important. But so is understanding what you save when you drop coverage.

• Dropping collision coverage: Most drivers save $400 to $800 per year. On older cars or cars with higher deductibles, you might save closer to $300 to $400. On newer cars, savings can exceed $1,000 per year. It depends on your car's value, age, and where you live.
• Dropping comprehensive coverage: Savings are typically $200 to $400 per year. Comprehensive is less expensive than collision, so the savings are smaller. But in areas prone to hail or high theft, comprehensive might cost $500 to $700 per year, making the savings more significant if you drop it.
• Dropping both collision and comprehensive: Total savings typically run $600 to $1,200 per year depending on your car and location. That's real money. For a driver with a $6,000 car paying $900 per year for full coverage, dropping it saves $900 annually.

Compare this to your emergency fund. If you have $3,000 in savings and drop coverage to save $900 per year, you're building a self-insurance fund. After three years, you've saved $2,700 more. That's meaningful financial protection without the insurance company.

Knowing when to drop collision and comprehensive coverage depends on your car’s value and insurance costs. This section covers common questions to help you make the right decision.