When to drop comprehensive and collision

By Aaron Crowe on August 15th, 2012

Having an old car that's paid off can be a blessing if it's in good running condition. Saving even more money by not having comprehensive or collision insurance coverage can be another.

Such physical damage coverage is meant to repair or replace your car if you are at fault in an accident, or the car is stolen or vandalized. Depending on the value of the car, comprehensive and collision coverage isn't a good expense because your insurance company will only pay what the car is worth, minus the deductible.

At a certain point, the value of the car will almost always be less than the cost of repairing it, even if the damage is minor. Any premiums might be better spent tucked away for a newer car.

That means you must weigh your the total of your annual comprehensive and collision premiums, plus your chosen deductible, against the potential payoff.

Here are some rules of thumb for when to drop comprehensive and collision coverage, collected from various experts we consulted:

  • When the car is 10 years or older.
  • When the premiums reach 10 percent or more of the potential payoff.
  • When the car is so old you would not repair it for a major mechanical issue.
  • When the car is worth less than $2,000 after subtracting the deductible and premium.

Other experts say that comprehensive coverage may be worth keeping because it's often such a small percentage of the overall insurance cost and covers a lot of events such as theft, vandalism, glass damage, fire and anything other than a collision.

If your car hasn't been paid off in full, you should maintain full insurance coverage with collision and comprehensive coverage with deductibles you can afford.

If you still want the extra coverage and are looking for ways to save money, find out how much you might save by raising the deductible. Whatever the savings is, put it aside in an emergency fund to pay the higher deductible when needed.

Having an old car in your driveway may not be exciting, but it can have a huge impact on your insurance rates.

Aaron Crowe
Aaron Crowe is a freelance journalist in the San Francisco Bay Area who specializes in personal finance topics.
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