When Is Collision Insurance Not Worth It? 

You want to protect your vehicle in the event of an accident, but at what cost? At some point it just may not be worth the additional cost to carry collision insurance. Unless you know what factors to consider, making this determination can be a bit challenging. But at what point do you ask yourself, “When is Collision Insurance not worth it?” The math is actually very simple when you know what to look for. Here are a few rules of thumb to use when determining whether or not you should drop your collision insurance.            

What Is Collision Insurance?

Collision Insurance provides coverage when you’re involved in an auto accident that results in physical damage to your car when striking an object like another vehicle, a fence or a utility pole. In many situations, this can be a very expensive event, making collision coverage totally worth it. In addition, If you’re involved in a collision with another motorist, collision insurance will cover you regardless of who caused the accident, assuming your auto policy includes collision coverage for that vehicle. Without collision insurance, the expense to repair your damaged vehicle could come out of your own pocket. So is there ever a situation that it is NOT worth it to have collision coverage?     

What Is the Average Price for Collision Insurance In NJ?

NJ is the most densely populated state in the union, and because of that and several other factors, NJ drivers pay some of the highest insurance premiums in the country. Collision insurance also comes with a deductible that typically ranges from $250 to $1,000 on your policy. A recent report produced by the National Association of Insurance Commissioners concluded that 73% of motorists across the country carry collision insurance. According to the Insurance Information Institute, NJ motorists are paying an average annual rate of between $450 and $596 for collision insurance. 

Should You Carry Collision Insurance?

With an estimated 270 million registered vehicles, there are more cars on the road today in the United States than ever before. According to the Highway Loss Data Institute, the average individual collision coverage insurance loss totaled $5,573. Most of that loss is absorbed by your carrier when you carry collision coverage. So if you are looking to drop this coverage, you need to consider a few main factors to see if it’s worth it: the current value of your vehicle, the annual premium you pay to carry collision (plus your deductible amount) in order to determine whether you should continue to carry collision insurance.     

When You Should Have It

Suppose you drive a late model vehicle that has a solid value of $18,000. You drive frequently with a 27-minute daily work commute. You’re involved in an accident that produces $4,800 of damage requiring you to pay your $500 deductible. You’re paying $512 per year for collision, plus your $500 deductible if you make a claim, which means a little over $1,000 for damage that costs almost five times that amount to repair. You depend heavily on this vehicle, and you need it to last for a few years.            

When It’s Probably Not Worth It

You’re driving a high-mileage car that has been paid off for three years. The paint is faded and the engine compression isn’t what it used to be, but it runs just fine. This vehicle plays a reserve role that you occasionally use to run errands. The estimated value is only about $1,000. Unfortunately, you’re involved in an accident that produces damage totaling $3,500, which exceeds the actual cash value of your vehicle. In order to carry collision insurance, it would cost you $450 per year plus a $500 deductible with a total cost of $950 to insure a car valued at $1,000. In this scenario, you wouldn’t receive any value at all.


Using the Ten Percent Rule, this formula may help you determine the coverage you need:

Value – Deductible = X

Note: If your premium payment for collision is 10% or more of X, then it may be time to drop collision coverage.


EXAMPLE: The value of your car is $2,700, minus your $500 deductible, which equals a $2,200 potential payout. If you’re paying $220 or more for collision insurance, then it’s probably time to drop the coverage. Of course, even in this scenario, it comes down to your preference for exposure to out-of-pocket expenses if your $2,700 vehicle were to be totaled. If you would rather not have to pay a couple of thousand dollars for repairs or replacement out of pocket, you may opt to keep the coverage.

When You Have the Option and When You Don’t

If you own your vehicle free and clear, the choice to carry collision coverage is completely up to you. However, if you still have a bank loan on your car, the lender (lienholder) may require you to carry collision coverage in order to protect their interests. Also, if you lease your vehicle, most auto dealerships will require you to carry collision insurance as part of the contractual agreement.          

Final Thoughts on Keeping or Dropping Collision Insurance

Remember, the main factors to consider when determining if collision insurance is right for you are the fair market value of your vehicle, your annual insurance premium and your collision deductible. Outside of these financial figures, other risk factors you may weigh in include the frequency at which you drive and the overall mileage you drive per year. Following the Ten Percent Rule (your annual collision premium payment equals 10% or more of your potential payout) is a solid starting point. If you are indeed exceeding the ten percent number, consult with an insurance professional to see if a policy adjustment is right for you. 

If you still have questions about collision insurance, and whether or not it’s still worth carrying on your policy, contact Plymouth Rock Assurance to speak with a friendly, knowledgeable representative who can help you determine what coverage options are best for you. Plymouth Rock has insured New Jersey drivers for decades and understands the risks and costs associated with protecting your assets. Find out more about affordable insurance companies and know the discounts you may be eligible for. You can also call today to get the information and honest advice that you need, and the excellent service you deserve.       

Plymouth Rock Assurance and Plymouth Rock are brand names and service marks used by separate underwriting, managed insurance, and management companies that offer property and casualty insurance in multiple states. Insurance in New Jersey is underwritten by Palisades Insurance Company and its affiliates. Each company is a separate legal entity that is financially responsible only for its own insurance products. Actual coverage is subject to the language of the policies as issued by each separate company.

Call 855-993-4470, get your free quote online, or find an agent to learn more about  Collision Insurance in New Jersey. If you need additional information it can be found on our Contact Us page.