Do I Need Collision Insurance on My Car?

••• wrecked car image by hazel proudlove from

Collision insurance pays for repairing your car if it is damaged in an accident, regardless of who is at fault. You still have to pay a deductible, in addition to the potentially costly insurance premiums for the coverage. If your car is not worth very much, you might be better off dropping the collision coverage and saving your money for something else, such as a new car.

Comprehensive Coverage

If you are dropping collision insurance, you probably want to drop comprehensive coverage as well, which is similar to collision but covers damage due to natural disasters and theft. If you live in an area with a high prevalence of theft and vandalism and your car is not garaged, that would be a situation in which you might want to keep comprehensive coverage even if you drop collision.

Expert Recommendation

Look up the current private party value of your vehicle to estimate how much it is worth and subtract your collision insurance deductible to approximate the maximum amount you could receive from the insurance company in an accident. If you are paying more than 10 percent of that amount per year on collision and comprehensive coverage, you could be better off dropping the coverage, according to financial expert Liz Pulliam Weston.


If you lease your vehicle, your agreement likely requires that you keep collision insurance. Vehicles that are financed often have the same requirement, and even if they do not, consider whether you could repay the loan even if your car were totaled and you had to buy a new one as well. If you live from one paycheck to another and could not possibly scrape up enough money to repair your car or buy a replacement vehicle if you got in an accident, keep collision coverage. In addition, if you rent cars frequently, consider keeping collision coverage on your personal vehicle because the coverage typically applies to rental cars as well.

Potential Savings

On average, someone with collision coverage pays $301 per year as of 2007, according to the Insurance Information Institute. Comprehensive coverage, which you would likely drop at the same time, costs an average of $136 per year. Liability coverage averages $475 per year. Therefore, you could cut your annual car insurance costs from about $912 to $475, which is a savings of $437, or 48 percent.