Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Jul 14, 2021

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Here's what you need to know...

  • Collision coverage is designed to provide coverage when your car is involved in an accident
  • If you have a loan or lease on your vehicle, then collision coverage may be a requirement
  • Additionally, without collision coverage, damages caused by an uninsured driver may have to be paid for out of your pocket

Collision coverage is often used when your car is involved in an accident with an object in the road or another driver.

In these situations, your collision coverage can help to get your car repaired and working like before. There are good reasons to keep collision coverage active on your policy.

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When should you remove collision coverage?


You may choose to remove collision coverage from your insurance policy for different reasons. One of the most common is when a loan or lease on your car is paid off.

Many times, the financial institution that provides an auto loan or lease requires physical damage coverage on your car’s insurance policy until your loan or lease is paid off.

Additionally, you may want to consider removing collision coverage if the coverage costs over 10 percent of the value of your car plus your deductible.

Vehicles depreciate over time, meaning that your insurance provider will cover a smaller amount of damage because your vehicle’s value continues to drop.

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When should you have collision coverage?

While there are many reasons you may consider removing collision coverage, there are times when you may need to keep it active.

For example, if you have a loan or lease active on the vehicle, the financial institution may require you to keep collision coverage.

They will then be listed as a lender on your insurance policy, allowing them to find out for certain that you are maintaining coverage.

While collision coverage may be required in situations like the above, it is not a state-required insurance coverage.

This means if you want to cover damages to your vehicle above any state required minimums, then you may want to keep collision coverage.

What are the risks of dropping collision coverage?


If you drop collision coverage, then you will be required to pay for damages that fall under this coverage out of pocket.

This means that instead of only paying a portion of the damages, the deductible, you will be responsible for the entire financial burden.

Without collision coverage, it may be difficult to come up with a down payment for a replacement car in the event of an accident.

Additionally, if your vehicle is damaged and you have to rent a car, you’ll need collision coverage to avoid buying the rental agency’s insurance policy.

Uninsured and underinsured drivers are also a big risk if you do not have collision coverage.

If you’re curious about the risk posed by uninsured and underinsured drivers, speak to your insurance provider about your policy coverage.

Making Decisions on Coverage

Determining when it’s right to drop collision coverage is never an easy decision.

Before you make the decision to drop your coverage, speak to your insurance provider about how this will affect you in a claim situation.

Different companies may offer different premiums for coverage, including collision coverage.

Additionally, if cost is a factor in your decision to drop collision coverage, you may want to consider getting quotes from other insurance providers.

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