Collision and Comprehensive insurance are optional auto insurance coverages. If you still have a loan on your automobile, the contract you have with your lender will probably force you to carry this type of protection. If you have paid off your vehicle, you can decide to keep or drop these aspects of your policy. You can shrink your auto insurance premiums if you remove or reduce these parts of your insurance policy's protection.

Collision insurance can pay for the cost to replace your car when your insured automobile hits or is hit by another vehicle. It can also compensate you for the cost to repair your car when your insured car hits a something other than a car such as a firehydrant.

Comprehensive insurance is also known as "Other than Collision." This part of your vehicle insurance policy pays for damages caused by falling objects, fire, theft, explosion, windstorm, hail, water, flood, vandalism, riot or civil commotion, contact with bird or animal, and breakage of glass.

Since both collision insurance and comprehensive insurance compensate you for damage to your car and not someone else's, you are allowed to decide whether or not to drop these from your policy. However, if your vehicle is leased, or you have a lien on your vehicle, you probably will not be able to do so because the actual owner of the vehicle or the bank or lender will want their interests protected.

The liability portion of your automobile insurance policy is the primary portion of the policy that pays others for their damages. If you collide with another automobile and you don't have collision insurance, it won't matter since your liability coverage will pay the other party.

Why Should You Eliminate Collision Insurance?

The rates for this portion of your automobile insurance coverage may be more than you want to pay. If your automobile is totaled, the insurance company will only pay you its book value. At some point, you may feel that the book value has diminished enough that the premiums of the collision insurance is no longer justified by the potential payment you might get from your insurance company. If you own your vehicle free and clear you can contact your insurer and drop or reduce the coverage.

You can reduce your collision coverage by raising the deductible. This will cut the rates and still give you some protection. Your lien holder or leaser may allow you to raise the deductible up to a specified limit.

Why Should You Drop Comprehensive Insurance?

The logic behind cutting or reducing automobile comprehensive insurance is the same as the thinking associated with dropping collision insurance. However, since the cost for comprehensive insurance is less than the cost of collision insurance, you may want to keep it even after you have dropped your collision coverage.

If your car is leased or you have a lien on it, you may not be able to drop the coverage. However the leaser or lender may allow you to reduce the coverage by raising your deductible. This will reduce your rates, although not as much as completely dropping the coverage would.

Most cars lose value as they get older. This reduces the amount of money that an insurance company is likely to pay to repair or replace a car. At some point you may feel that the amount of premium your automobile's collision or comprehensive coverage adds to your car insurance bill is too much. Exactly when that point comes is determined by your personal comfort level with risk.

Removing comprehensive insurance coverage and/or collision coverage means that you take more risk. If your feel that you are unlikely to have an at fault accident because you have a good driving record this may make sense for you. If you garage your auto your auto is perhaps less likely to be stolen or vandalized. If this is true, dropping this coverage may be the right thing.