When Collision and Comprehensive Auto Insurance is a Bad Idea

Auto insurance typically requires a minimum level of bodily injury liability and property damage liability insurance, or the car owner must have the financial means set aside to meet minimum requirements in the event an accident occurs. Both collision damage insurance (pays for damages caused to your car if involved in an accident) and comprehensive insurance (pays for damages caused to your car due to alternative means like “Acts of God,” theft or vandalism) auto insurance are add-ons to a basic auto insurance policies and are not required by law. There are times when avoiding collision and comprehensive auto insurance is a smart idea.

Reasons to Avoid Collision and Comprehensive

If you have an older vehicle where the cost of repairing damage to it would exceed the actual value of the car, avoiding collision and comprehensive auto insurance is beneficial. Collision and comprehensive auto insurance can add hundreds of dollars worth of costs on top of an already pricey policy, and if you are driving around a low-value vehicle, the premiums paid for the vehicle might be worth more than the actual cost.

If your vehicle is is severely damaged, you would be required to meet your financial deductible, and then you would get a reimbursement from your insurance company. Depending on your insurance policy, the deductible amount can range from $500-$2000. Many older vehicles may only sell for that amount of money, so paying for the additional collision and comprehensive auto insurance does not make financial sense.

When Collision and Comprehensive are Necessary

If however you purchased and financed a new car, you must carry collision and comprehensive auto insurance. Technically, the financial institution that loaned you the money owns the car until you make the final payment and receive the title. Therefore, they require collision and comprehensive auto insurance to protect their asset.