The choice of whether or not to purchase comprehensive and collision coverage is a serious decision.   If your vehicle is financed, then the lender will most likely require this coverage.  However, if your vehicle is not financed then you have the option of whether or not to purchase this coverage. 

First, it is important to understand what collision and comprehensive coverage can do for you.  Collision coverage pays for damage or replacement of your covered vehicle in an accident.  Comprehensive coverage pays for damage or replacement of your covered vehicle resulting from a non-collision, such as vandalism, theft or fire.   This coverage is an individually priced component of your overall policy.  As a result, eliminating this coverage will reduce your monthly premium.  However, you must ask yourself this question:  Is the savings worth the risk?  

This decision must be made according to your individual situation.  There are many factors that will affect the cost of coverage including, but not limited to:  the value of your car, the age of the drivers on the policy, and your zip code.   

If you have an older car with a low resale value you might decide that this coverage is not worth it. However, if you have a newer, more expensive car, the cost of repairing the damage may exceed the cost of the increased premium.

As a means of comparison, the following data was derived based on two drivers (aged 41 and 16) with the 16-year-old being the primary driver of the cars indicated in the comparison.  These premiums were based on actual quotes received from one insurance company. 

How to determine your out-of-pocket costs: 

No Coverage:  You have no additional costs until you have a collision or incur a non-collision incident.  When you do have an incident, you are responsible for 100% of the costs. 

Coverage:  You incur the additional monthly premium expense as indicated in the charts above.  When you have an incident, you must pay the policy deductible and your insurance company will pay the remainder. 

Examples:  

1. If you incur an incident resulting in $5,000 of damages and your policy has been in force for one year and you have a policy deductible of $530, you would be required to pay out-of-pocket:  $1,331.84 for the car valued at $5,340.  This amount equals the sum of the deductible plus the cost of premiums for one year.  Since your policy had been in force for one year, the premiums would have already been paid.   Therefore, at the time of the incident, you would only pay the deductible.  For this same incident, you would pay $5,000 if you had no coverage. 
2. If you incur an incident resulting in $10,000 of damages and your policy has been in force for two years and you have a policy deductible of $1,530, you would be required to pay out-of-pocket:  $3,053.76 for the car valued at $32,065.  Once again, since your policy had been in force for two years, the premiums would have already been paid.  Therefore, at the time of the incident, you would only pay the deductible.  For this same incident, you would pay $10,000 if you had no coverage.

The longer your policy is in force, and the less expensive the vehicle, the more likely it will be that you will pay more in premiums than you would have paid to repair the vehicle had you not had coverage.  However, up until this breakeven point, you will be out-of-pocket more without this coverage, than with the coverage.  Another point to consider is whether or not you have the money to repair your vehicle should you decide not to obtain this coverage.  In our first example, your out-of-pocket expenses with the coverage totaled $1,331.84; however, you had already paid $801.84 in premiums.  It is then a little bit easier on the pocketbook to come up with the deductible at the time of the incident versus coming up with the entire amount required to repair the vehicle.

Whether or not to obtain comprehensive and collision coverage is a personal decision that only you can make based on your individual circumstances.  However, in our examples above, the purchase of this coverage would have been a great savings.   

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