Weighing costs and risks of dropping collision and comprehensive insuranceUnlike liability insurance, which most states require you to buy, collision and comprehensive are optional. Collision pays for repairs when your vehicle is damaged from crashing into another car or object, or from flipping over. It also covers damage from potholes. Comprehensive pays for repairs when your vehicle is damaged by some other cause, such as a natural disaster, collision with an animal, or vandalism. Comprehensive also pays out if your vehicle is stolen.
If the cost of repairs is greater than the value of the vehicle, then your car is declared a total loss, and the insurer pays you the market value of the car.Obviously you should have collision and comprehensive coverage on a newer car to protect your investment. The lender, in fact, likely will require you to have both types of coverage if you took out a loan to purchase the car. (See: " Auto insurance: 8 things you should know about it.") After the car has lost most of its value, though, it makes sense at some point to drop collision and comprehensive. Certainly there's no reason to keep them if the car isn't worth much more than your deductible. Even if the car were totaled, you wouldn't collect much of anything from the insurance company to repair or replace it. (See: " Collision and comprehensive coverage: should you buy?") But otherwise, "there's really no set rule for deciding when those coverages become unnecessary," Ohio Insurance Institute spokesperson Mary Bonelli says.
Gauging your car's valueTo aid the decision, first find out how much your car is worth. Kelley Blue Book and NADAguides provide online tools to look up values for used vehicles. Your insurance agent can also help. Then compare the car's value to the deductible and the premiums you pay for collision and comprehensive. Weigh the costs of the coverage against taking on the financial risks yourself. "Can you cover it out of pocket if you're faced with a big car repair bill?" Bonelli says. You don't have to drop both. You can keep one and drop the other. When deciding, keep in mind you're more likely to file a collision claim than a comprehensive claim. For every 100 insured cars in 2010, 5.7 collision claims were filed versus 2.6 comprehensive claims, according to the Insurance Information Institute. Nationwide, the average driver will experience a car collision every 10 years, according to an auto claims analysis by Allstate Insurance Co.
Finally, get some good advice."Because these considerations are different for every consumer and may be complex, we recommend they reach out to a trusted, local insurance adviser," Cook says.