You need collision insurance on an old car if the car is financed or leased. You should also keep collision insurance on an old car if you cannot afford to pay out of pocket to repair or replace the car after an accident.
A general rule of thumb is that you can think about dropping collision insurance if the premium exceeds 10% of your car’s value, so it’s possible that collision coverage might not be worth it on an old car that isn’t worth much. But you should only consider this rule in the context of your own circumstances. If you depend on your car for everyday use and can’t afford to pay for repairs, collision insurance could keep you out of a difficult situation if your vehicle is damaged in an accident.
In general if you can afford to replace just about anything than generally I would not insure it. I would be strict looking at this answer though. Do you actually have the money to replace it in a savings account right now? Will you be able to save the money that you will not be spending on the added insurance cost and put it directly into that savings account?
If the answers to these two questions are both Yes, than I would consider dropping collision coverage.
Also, since you may have the money to replace it the car yourself, I would also take the time to confirm that both your liability and uninsured/underinsured motorist coverage are engough.
Collision insurance is a type of car insurance coverage that pays to repair or replace your car if you’re involved in an accident, regardless of who was at fault. Collision car insurance is never required by state law, but dealerships and banks usually require it for leased or financed cars. It only pays for damage to your own vehicle, and it does not include coverage for medical bills. … read full answer
What Collision Insurance Covers
Collisions with other vehicles
Collisions with objects like fences or trees
Single-car accidents that involve rolling or falling over
Damage caused by hitting an obstruction in the road, such as a pothole
Collision coverage costs an average of $382 per year. The cost of collision insurance varies based on your driving history, you car’s value, and your deductible amount. For example, high-risk drivers with a history of claims tend to pay more for collision insurance because they are more likely to be involved in an accident. And if you choose a low deductible for your policy, you will pay more for coverage.
A good rule of thumb is that you should have collision insurance on your car until the cost exceeds 10% of the vehicle’s value. However, even then, you should not drop collision insurance if you cannot afford to pay out of pocket to repair or replace your car after an accident that’s your fault. To learn more, check out WalletHub’s guide to collision insurance.
Older cars are less expensive to insure than newer cars, as older cars are cheaper to replace, but the exact cost of insuring an older car depends on a variety of factors, including the types of insurance and the coverage levels that a driver selects. The driver’s age, driving history and claims record are also more likely to have a significant influence on auto insurance rates than the age of the car. … read full answer
There are exceptions to the rule that older cars are more affordable to insure, however, including some foreign-made and classic cars, which may have expensive parts and be difficult to replace. Insurance companies don’t normally offer discounts for older cars, either.
You should pay special attention to the type of coverage you are paying for, if you are insuring an older vehicle. Allstate and the Insurance Informative Institute both say that if your annual premium is more than 10% of your car’s value, you might consider dropping the comprehensive and collision coverage on it.
You should avoid paying more for coverage than the vehicle is worth. However, you might not be able to drop coverage if your car is leased or financed. Insurance requirements vary by state, too, so it’s important to make sure you have at least the minimum amount of coverage needed for your situation, even if your car is older.
The best way to understand the cost of insuring an older car in your specific case is to get quotes from multiple insurance companies.
You should drop full coverage insurance on your car when the cost of the insurance equals or exceeds the potential payout, should a covered event occur. You may also want to drop full coverage if you are willing to pay for repairs out of pocket, or if you would prefer to replace your vehicle if it’s damaged. … read full answer
For example, an older car with high mileage may not be worth costly repairs, and you might want to save for a new car instead of paying for extra insurance. Similarly, a driver who uses their car infrequently might take the gamble of dropping full coverage, since they are statistically less likely to damage their vehicle.
You should consider dropping full coverage car insurance when...
Your car is old or has a lot of miles. The less valuable your car is, the less likely it is that you need much coverage beyond your state’s requirements. A good rule of thumb is that when your annual full-coverage payment equals 10% of your car’s value, it’s time to drop the coverage.
You have a big emergency fund. If you don’t have any savings, car damage might leave you in a severe bind. In that case, the money you spend on full coverage insurance will protect you from insurmountable repair bills. Consider keeping your full coverage insurance until you have some savings built up.
For those who aren’t quite sure what it means exactly, “full coverage” is a catch-all term for insurance that covers you, other drivers, and your vehicles. It generally includes both collision and non-collision insurance. In other words, there is no single policy for "full coverage" car insurance. Instead, you select a combination of coverages that you feel is enough to handle all aspects of a car collision. With a well-rounded collection of coverages, you are “fully” protected from a variety of vehicular hazards, ranging from injuries and collision damage to weather events, encounters with wildlife, and vandalism.
However, it’s important to remember that different states require different levels of coverage. Make sure to check state requirements before making any changes to an insurance policy.
With that being said, it’s wise to get full coverage for a new, rare, or expensive car. A $40,000 truck is worth the few hundred dollars a year for full coverage insurance, for example. Otherwise, you run the risk of having to drop another $40,000 on a new truck if you’re involved in a serious accident.
Probably not. Collision pays you for loss or damage to the vehicle in a crash. Collision is the primary payer when you are involved in a crash with another person, regardless of fault. You would only feel the effects of not having collision if you hit a deer (as an example), caused a crash with another vehicle or were the only vehicle involved in a crash. If another driver was at fault and you did not have collision, the other driver's insurance would cover your vehicle. Comprehensive is different in that it covers theft, storm damage, vandalism, etc. So if you drop collision and/or comprehensive coverage, you should have the money saved up to buy another vehicle. Assuming you do or you have other means available to replace the vehicle, collision coverage is pretty much a waste as vehicles age, deteriorate and depreciate in value.
WalletHub Answers is a free service that helps consumers access financial information. Information on WalletHub Answers is provided “as is” and should not be considered financial, legal or investment advice. WalletHub is not a financial advisor, law firm, “lawyer referral service,” or a substitute for a financial advisor, attorney, or law firm. You may want to hire a professional before making any decision. WalletHub does not endorse any particular contributors and cannot guarantee the quality or reliability of any information posted. The helpfulness of a financial advisor's answer is not indicative of future advisor performance.
WalletHub members have a wealth of knowledge to share, and we encourage everyone to do so while respecting our content guidelines. This question was posted by a WalletHub user.
Please keep in mind that editorial and user-generated content on this page is not reviewed or otherwise endorsed by any financial institution. In addition, it is not a financial institution’s responsibility to ensure all posts and questions are answered.
Ad Disclosure: Certain offers that appear on this site originate from paying advertisers, and this will be noted on an offer’s details page using the designation "Sponsored", where applicable. Advertising may impact how and where products appear on this site (including, for example, the order in which they appear). At WalletHub we try to present a wide array of offers, but our offers do not represent all financial services companies or products.