When to Drop Collision Insurance?

Think of yourself driving down a snowy road when you suddenly hit a patch of ice—collision insurance suddenly becomes so essential. This coverage helps pay for repairs if your vehicle collides with another car, tree, or guardrail. But is it always worth it? In this article, we’ll discuss when to drop collision insurance, covering factors to consider, potential savings, and what happens after you drop it.

When to Drop Collision Insurance Coverage

Although collision insurance is very useful to have, there are times when it might not be a good idea to pay a few hundred dollars for this coverage. If your vehicle ages or loses too much of its value, it’s not recommended to maintain collision insurance.

Here are some key reasons for dropping collision coverage for auto insurance:

1. Your car’s value is too low
2. Your annual premium exceeds 10% of your car’s value
3. You rarely drive your car
4. You can afford to pay for repairs out of pocket
5. Your deductible costs more than potential repairs
6. You plan to replace, not repair, after an accident
7. You’ve paid off your car loan
8. You’re covered under another policy
9. Your vehicle is older than 10 years
10. You’re comfortable taking on more financial risk
11. You have a reliable backup vehicle
12. Your driving habits have changed

Learn about what is collision insurance and what it covers. If you need collision insurance, and comprehensive car insurance along with state-mandated liability auto insurance, check out our most reliable and affordable full coverage auto insurance policy. 

1. Your Car’s Value Is Too Low

One clear reason to drop collision insurance is when your car is worth very little. As cars age, they lose value due to depreciation and regular wear and tear. If your car’s actual cash value is just a few thousand dollars, keeping collision coverage may not be worth the cost.

Here's why: It’s time to reconsider when your deductible and premium together cost more than your car’s payout potential. Suppose your vehicle is valued at $2000 and your deductible is $1000. If you get into an accident, your insurance will cover at most $1000- hardly worth the ongoing premiums.

In such cases, it would be smarter if you just save that money for a future vehicle investment or put it toward repairs yourself. Holding into coverage for a low-value vehicle just doesn’t offer a good return.

2. Your Annual Premium Exceeds 10% of Your Car’s Value

You should remember the common rule of thumb in the world of auto insurance: If your insurance premium costs more than 10% of your car’s current market value, it’s probably time to drop your collision coverage.

Let’s say your car is worth $4000. If you are paying over $400 annually for collision insurance, that expense outweighs the coverage benefits. You are investing too much into protecting something that’s not worth the financial burden.

Besides, those high premiums could be redirected to a savings account for future repairs or even a replacement car. It’s a simple way to manage your budget more effectively. At the same time, you are reducing unnecessary insurance costs.

3. You Rarely Drive Your Car

If your car spends more time parked than on the road, maintaining collision coverage might not make financial sense. The less you drive, the lower your risk of being involved in an accident, and the less valuable this coverage becomes.

This scenario is especially common for people who work from home, own multiple vehicles, or rely on public transportation. If your car is just sitting in your garage, why pay for collision insurance you’re unlikely to use?

However, in this case, you might still want to keep comprehensive car insurance to protect against theft, vandalism, or natural disasters.

4. You Can Afford to Pay for Repairs Out of Pocket

If you’re financially stable and have a solid savings account, you might not need to carry collision insurance. Being able to pay for repairs with your personal expenses means you can handle the unexpected without relying on your insurance policy.

For example, if a minor accident causes $500 in damage and your deductible is $500, having auto collision insurance doesn’t really offer any benefits. Plus, avoiding an insurance claim could prevent your insurance premium from going up later.

In this case, dropping this coverage makes sense if repairing your car wouldn’t put you in a financial bind. Instead of paying for coverage you may never need, that money could be better spent elsewhere, like an investment or paying off debt.

5. Your Deductible Costs More Than Potential Repairs

If your deductible is higher than the typical repair costs, it may be time to drop collision coverage. If your deductible is $1,000, it is pointless to keep this coverage if most repairs cost less than that.

For instance, If you scratch your bumper, the repair could cost $800. If your deductible is $1,000, you will have to pay the full cost yourself, even though you have collision coverage. In this case, having collision insurance might not be worth it. Instead, you could save money for minor repairs.

6. You Plan to Replace, Not Repair, After an Accident

If your plan is to replace your vehicle instead of repairing it after an accident, keeping collision insurance might not be worth it. This may be applicable to the owners of older cars, where repairs cost more than the car’s actual market value.

For instance, if your car gets totaled and isn’t worth fixing, that money spent on insurance coverage could have been saved toward buying a replacement.

7. You’ve Paid Off Your Car Loan

When you’re still making payments on a car loan, most lenders require full coverage, which usually includes collision insurance. This protects their financial interest if something happens to the vehicle.

However, once that loan is fully paid off, you’re no longer legally bound to keep collision coverage. Without the lender's requirement, you will have the freedom to reassess your coverage needs.

If your car’s value has substantially depreciated or repairing it isn’t financially worth it, you'd better drop collision insurance.

Read More: Do you need full coverage on a financed car?

8. You’re Covered Under Another Policy

If your vehicle is already covered by another insurance policy, you don’t need to carry a collision insurance policy. This can happen if you’re on a family member’s policy that includes a collision for your car.

However, there’s a catch here! Your car typically needs to be kept overnight at the policyholder’s address for this to apply. If that’s the case, you can drop your own collision insurance and could save money without compromising protection.

9. Your Vehicle Is Older Than 10 Years

A common rule of thumb is to consider cutting collision coverage if your car is more than 10 years old. By that age, most vehicles have lost a sizable amount of value due to depreciation and wear and tear.

If your older car’s cash value is low, it might not be worth spending extra money on collision insurance. In such a case, it would be better if you switch from full coverage to liability-only insurance. Because repair costs could easily exceed the car’s fair market value (FMV). This means any payout from your insurer would be minimal after deducting your deductible.

10. You’re Comfortable Taking on More Financial Risk

If you’re financially stable and willing to handle potential repair costs yourself, you might consider dropping collision insurance. This choice suits those who are confident they can cover sudden expenses without jeopardizing their budget.

For example, if you have a solid emergency fund or access to a credit card for unexpected repairs, paying for collision coverage that you’re unlikely to use doesn’t make sense.

11. You Have a Reliable Backup Vehicle

If you own more than one vehicle, you might want to drop collision insurance on an older or less-used car. Having a reliable backup car reduces the urgency to repair one quickly after an accident.

In this case, you might not want to carry coverage for every car in your household so that you can stop spending extra money. We suggest focusing your insurance coverage on the vehicles you use most often.

12. Your Driving Habits Have Changed

If you’ve retired, work remotely, or just don’t drive much anymore, it might be time to drop collision insurance. Less time on the road means a lower chance of being in an accident.

For example, if your car only leaves the driveway for occasional errands, continuing to pay for collision coverage might not be financially sensible. Instead, you should consider focusing on comprehensive coverage to protect against risks like theft or natural disasters.

What Happens If You Drop Auto Collision Insurance

If you decide to drop collision insurance, your auto insurance coverage will no longer pay for repairs if your vehicle is damaged in an accident you cause. This means any repair costs must come out of pocket. If your car is older or not worth that much, this isn’t a big deal.

However, if you rely on your vehicle daily and an accident would cause financial strain, dropping collision coverage could be risky. Without this protection, you might struggle to pay for repairs or replace your vehicle if it’s a total loss.

Another thing to consider is leasing or financing. If you still have a car loan, your lender likely requires collision coverage. Dropping it before your loan is paid off could violate your insurance policy and cause financial trouble.

What Should I Do After I Decide to Drop Collision Car Insurance?

If you’ve decided to drop collision coverage, follow these steps to ensure a smooth transition:

• Talk to your insurance provider. Before making any changes, consult your insurance company to confirm how dropping collision insurance will affect your overall policy and costs.
• Review your coverage. You may still want to keep comprehensive coverage, which protects against theft, vandalism, and natural disasters like hail or flood damage.
• Consider raising your emergency fund. Without collision coverage, unexpected repair costs will come out of pocket. You should set savings that can help prepare for future expenses.
• Reevaluate your coverage over time. Insurance needs change. If you buy a new vehicle or your financial situation shifts, reassess whether collision insurance is right for you.

How Much Money Could I Save by Dropping Collision Coverage?

The amount you save depends on your insurance premium, deductible, and vehicle's value. On average, collision insurance costs a few hundred dollars per year. In fact, in 2025, the average annual cost of collision insurance in the US is around $814. If your car is worth very little, dropping coverage could free up money for savings, repairs, or a future vehicle purchase.

However, you also need to consider potential risks. If an accident happens, you’ll pay out of pocket for repairs or replacements. So, balance your insurance costs with your ability to handle unexpected expenses.

When Does It Make Sense to Drop Collision Insurance: The Bottom Line

Dropping collision coverage makes sense when your vehicle’s value is low, your deductible is high, or you can pay for repairs yourself. If your insurance premium exceeds 10% of your car's value, it may not be worth keeping. Evaluate your budget, risk tolerance, and driving habits before you make a decision.

Frequently Asked Questions (FAQs)

Do I need collision insurance if I have liability insurance?

Yes, because liability insurance only covers damage to others’ vehicles and property. Collision insurance covers repairs to your own vehicle if you cause an accident. Without it, you’ll have to pay for repairs yourself.

What does collision car insurance cover?

Collision insurance covers damage to your vehicle from crashes with other cars, objects like a guardrail, or single-vehicle accidents. It does not cover theft, vandalism, or natural disasters. All these fall under comprehensive insurance.

How do I find out the value of my car?

You can check your car’s actual cash value using online tools like Kelley Blue Book or insurance companies’ valuation services. Your vehicle’s age, wear and tear, and market value all impact its worth.

When to drop comprehensive insurance?

Drop comprehensive insurance if your car is worth very little, and you can handle repair or replacement costs. However, if you live in an area prone to theft, hail, or natural disasters, keeping comprehensive coverage may still be wise.

At what point should you remove collision from car insurance?

If your insurance premium and deductible exceed your vehicle’s value, it’s time to drop collision coverage. Also, if your car is old, rarely driven, or easily replaceable, paying for coverage may not make sense.

At what point does collision insurance stop being beneficial?

Collision insurance stops being beneficial when your vehicle’s value is so low that a total loss payout wouldn’t justify the cost. Also, if your deductible is close to or exceeds potential repair costs, dropping coverage is a smart move.

Should I keep collision insurance on an old car?

If your old car’s market value is low, collision insurance might not be worth it. However, if you drive frequently, lack savings, or can’t afford a replacement, you should keep collision coverage provides extra security.

Should I have collision insurance on a 10-year-old car?

If your 10-year-old car's insurance premium is high compared to its actual cash value, dropping collision insurance might save you money. But if your car is still worth a lot, keeping the coverage can be beneficial.