2-Minute Money Manager: Should I Drop Comp and Collision Car Insurance Coverage?

Car Fire
Photo by djumandji / Shutterstock.com

Welcome to your “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.

Today’s question is about insurance; specifically, whether it’s a good idea to drop a seemingly important part of any car policy: comprehensive and collision coverage.

These days, I carry full coverage on my car, including comp and collision. But there was a time not long ago that I didn’t. What makes the difference? Watch the video below to find out. Or, if you prefer, scroll down to read the full transcript.

You also can learn how to send in a question of your own below.

For more information on this topic, check out “The Complete Guide to Getting the Best Possible Deal on Car Insurance” and “Get a Free Copy of the Report That Impacts Your Car Insurance Rates.” You can also go to the search at the top of this page, put in the words “car insurance” and find plenty of information on just about everything relating to this topic.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this question is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.

Our question today comes from Don:

“I have a 2006 Ford F150 and a 2010 Ford Escape, both paid for. At what time is it financially best to no longer carry collision and comprehensive insurance on these vehicles and simply go to liability?”

Let’s begin with an explanation of what comp and collision is.

Collision — as the name implies — covers you if you collide with something or somebody. For example, if you run into a pole or run into another car. In short, collision is what fixes your car when you hit something and you’re at fault. (If it’s another driver’s fault, his or her liability coverage should pay to fix your car.)

Comprehensive, on the other hand, covers a comprehensive list of things that could damage your car. It covers basically everything that doesn’t involve collisions. For example, you hit a deer, a rock hits your windshield or your car gets stolen, vandalized or hail-damaged.

Don’s asking when it makes sense to drop comp and collision. Keep in mind that you never, ever should drop liability. It’s required both by law and common sense.

If your car isn’t paid for, your lender will require you to have comp and collision. Once you own your car outright, you can ask yourself, “Should I keep paying for comp and collision?”

When to Drop Collision Insurance

There’s a well-known rule of thumb, which we’ll call the 10 percent rule. It suggests that when the premiums for comp and collision insurance exceed 10 percent of the value of your car, you might consider dropping these coverages.

Example: Your car is worth $5,000, and you’ve got a $500 deductible. If your car gets totaled, you’ll get a check from the insurance company for $4,500: $5,000, less the $500 deductible. Using the 10 percent rule, if you’re paying more than $450 for comp and collision — 10 percent of $4,500 — you’d consider dropping it.

This is a rule of thumb. It doesn’t mean you have to or should do this. If you can’t afford to fix or replace your car, and one of the things covered by comp and collision occurs, you could be in hot water. If that makes you nervous, retain the coverage.

Personally, I don’t currently drive an inexpensive car, but I have in the recent past, and I did drop my comp and collision. The car wasn’t worth much, about $5,000. I had money in the bank to replace it should it prove necessary, and I’d driven for decades without filing a claim. So, I judged that comp and collision was costing more than it was worth.

This is something you can think about as well.

I hope that answers your question, Don. Have a super-profitable day and meet me right here next time!

Got a question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter, just as you would with any email in your inbox. If you’re not subscribed, fix that right now by clicking here. It’s free, only takes a few seconds, and will get you valuable information every day!

The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Got any words of wisdom you can offer on today’s question? Share your knowledge and experiences on our Facebook page. And if you find this information useful, please share it!

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
8 Ways to Slash the Cost of Homeowners Insurance
8 Ways to Slash the Cost of Homeowners Insurance

Reviewing this critical insurance policy takes a little effort, but it pays off big.

15 Things You Should Always Buy at Yard Sales
15 Things You Should Always Buy at Yard Sales

You can save a ton of money — especially if you spot any of these items.

8 Surefire Ways to Get Rid of Debt ASAP
8 Surefire Ways to Get Rid of Debt ASAP

Here’s how to pay off debt fast and pain-free.

Want a Healthy Retirement? Turn This Device Off
Want a Healthy Retirement? Turn This Device Off

A common behavior becomes increasingly dangerous for those who are 50 or older.

5 Reasons You Should Claim Social Security ASAP
5 Reasons You Should Claim Social Security ASAP

Experts often recommend postponing claiming your Social Security retirement benefits. But there are situations in which you should start taking the money sooner.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Whether you resell it for a big profit or add it to your own wardrobe, this type of clothing is a hidden steal.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

This Surprise Factor Can Raise Your Risk of Dementia
This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

Organize Your Home With These 10 Thrift Store Finds
Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

11 Laws You Could Be Breaking Without Knowing It
11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

Is This Treatable Condition Causing Your High Blood Pressure?
Is This Treatable Condition Causing Your High Blood Pressure?

Researchers say too many doctors are overlooking this potential source of hypertension.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

Taking a Multivitamin? Here’s Why You Should Reconsider
Taking a Multivitamin? Here’s Why You Should Reconsider

A new study has bad news for the millions of Americans who spend money on multivitamins.

21 Items to Cut From Your Budget That You Won’t Even Miss
21 Items to Cut From Your Budget That You Won’t Even Miss

Start off the new year by implementing these small-but-smart savings strategies. They’ll soon add up.

This Is America’s New Favorite Grocery Store
This Is America’s New Favorite Grocery Store

Consumers say a familiar name has become their go-to source of grocery items.

Internet Providers Can’t Charge You for This Anymore
Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

15 Painless Ways You Can Cut Costs in 2021
15 Painless Ways You Can Cut Costs in 2021

Follow these tips to save, so you’ll have money for things that really matter.

Prepare to Pay More for These 31 Drugs in 2021
Prepare to Pay More for These 31 Drugs in 2021

More than 700 prescription medications have seen price hikes so far this year. Here’s a look at the worst.

10 Cars You Are Most Likely to Keep for 15 Years
10 Cars You Are Most Likely to Keep for 15 Years

The cars that owners hold onto the longest have one thing in common, a new study shows.

The 10 Golden Rules of Becoming a Millionaire
The 10 Golden Rules of Becoming a Millionaire

I’m a millionaire several times over. I got here the same way you can — by following these simple steps.

5 States Lowering Taxes This Year — and 2 Raising Them
5 States Lowering Taxes This Year — and 2 Raising Them

State personal income tax rates, brackets and deductions just changed in these places.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.