Auto Insurance Primer: Liability v. Collision

States do not mandate that drivers have collision and comprehensive coverage in their auto insurance policies because it only protects the driver. If you want to risk your car’s value by bypassing this type of coverage, the state does not care. In some cases, this may be warranted. Collision and comprehensive accounts for between 30% and 40% of your premium. So, you can save a lot of money by skipping them. (That is, unless you total your car.)

If your car is an older model and not worth very much, for example, a case can be made for bypassing collision and comprehensive coverage. Say your car is worth $3,000 and your car insurance has a deductible of $1,000. That means you would get a maximum benefit of $2,000. If your policy costs more than $300 a year for collision and comprehensive, it’s probably not worth it. The general rule of thumb is you shouldn’t pay more than 10% of your car’s Blue Book value for collision and comprehensive insurance. If you depend on your vehicle and are not in the position to pay for repairs or buy a new car, this coverage may be worth it to you, however.