How Cutting This Insurance Add-On Can Keep $1,100 in Your Wallet

If you have a car, you’ve probably noticed your insurance rates have been going up in recent years. Costs rose 15% in 2024, according to Insurify Insurance Agency’s review of more than 90 million car insurance quotes. It predicts an additional 5% increase this year.

You can take certain steps to reduce those cringe-inducing bills, and one of the most impactful is to discontinue your comprehensive or collision insurance. It can save you hundreds of dollars a year—or more than $1,100 if you drop both—but you’ll first need to determine whether you need that coverage.

Why Do Car Insurance Rates Go Up?

Rising repair costs, climate disasters, and the number of uninsured drivers cruising around out there on the roads all contribute to rising costs.

Auto insurance companies are feeling the pinch and passing it on to consumers. Insurify says insurers aren’t collecting enough in premiums to comfortably meet the expense of claims they must pay. The Insurance Information Institute reported in 2024 that insurers were paying $1.10 in claims for each $1 they received in premiums.

“There can be various causes and factors,” said Seth Hirschhorn, principal and advisor at World Insurance Associates. “A few examples are the increase in technology in vehicles … any ‘small’ accident that damages cameras, censors, and similar aspects of a car can cost thousands of dollars to fix, not just a few hundred dollars to repair.”

Several personal issues can increase your premiums as well.

• How often you drive: The more time you spend behind the wheel, the higher the odds of a mishap increase.
• Your gender and marital status: Data shows that men are more likely to be involved in car accidents, as are single drivers.
• Your credit history and score: Insurers want to see that you’re a reliable, responsible individual who meets your obligations.

Should You Change Your Coverage to Lower Your Premiums?

The amount and kinds of coverage you have also impact your costs, of course. You may want to look at two types of coverage in particular that may be in your policy.

Comprehensive and collision coverage aren’t required by law in most states, and together, they cost an average of $1,165 a year. Your lender will probably make you carry them if you’re still paying off your vehicle loan. Deciding whether to keep them if your car is paid off can involve several factors.

“Consider the statistics of the vehicle and your financial situation as a driver,” advises Dan Babb, a State Farm agent in Covington, Georgia. “Can you afford to pay the full price of repairs? How many miles are on the vehicle? What would the replacement cost be versus the price of the coverage? Do you live in a heavily wooded area? If a tree falls on your car or if you hit a deer, your comprehensive coverage is responsible for the repairs to your vehicle.”

These coverages aren’t a single package deal. You have the option of purchasing one but not the other, always assuming that you’re not still paying off your auto loan.

Should You Drop Comprehensive Coverage?

Comprehensive coverage protects you against things you can’t prevent. Think fire, storm damage, or theft. Reasons to consider dropping this coverage include:

• Value: If your car is paid off or not worth a lot of money, it might not be worth it to carry comprehensive coverage.
• Affordability: If you comfortably can afford the cost of repairs out of pocket, comprehensive coverage may be an unnecessary expense.
• Risk: Consider outside factors that might increase the likelihood of this type of damage. Do you live in a heavily wooded area where a storm might blow a tree down onto your vehicle because you don’t have a garage? If so, comprehensive coverage might offer more value.

Should You Drop Collision Coverage?

Collision coverage pays out if your vehicle comes in contact with another car or some other inanimate object, and it’s found that the mishap was your fault. As with comprehensive coverage, there are reasons to consider dropping collision coverage:

• 10% guideline: If the annual cost of collision coverage is 10% or more of the vehicle’s market value, that’s a sign that the coverage might not be worth the cost. A car worth less than about $5,000 is most likely to fall into this category.
• Driving habits: How often do you take your car out on the road? Each mile you drive increases the odds that you might be involved in a fender bender and find yourself in need of this coverage. Is yours a two-car family, so you’d still have access to transportation in the event of a total loss?
• Financial risk: Can you consider paying out of pocket to repair this type of damage without feeling too queasy?

Other Ways to Reduce Your Car Insurance Costs

You have several other options that can reduce your premiums.

The Bottom Line

Many factors that affect the cost of your auto insurance are out of your control, but there are steps you can take to reduce the bite that premiums take out of your budget. One that can save you big is cutting your comprehensive or collision coverage if you’ve paid off your loan. Consider the value of your car, how much you drive, whether you could afford the kinds of damage covered by collision and comprehensive on your own, and the cost of your current coverage.