Is Collision Coverage Too Expensive? Why I Still Recommend Giving It Serious Consideration

Many drivers think, “If I go several years without making a claim, wouldn’t I be better off saving the premiums and using that money to pay for repairs myself?” As a result, they start to wonder whether it makes more sense to save the money rather than pay for this coverage every year.

My view is that if you can afford the Collision premium but cannot easily absorb the financial loss of vehicle damage, I would recommend seriously considering keeping this coverage rather than cancelling it simply to save money.

That is because Collision coverage is not just about protecting your vehicle when you cause an accident. It can also give you another option for dealing with vehicle damage when liability is disputed.

1. You May Think You Are Not at Fault, but ICBC May Decide Otherwise

Many drivers believe that as long as they drive carefully and do not hit another vehicle, they should be fine.

In reality, what you believe happened and how ICBC ultimately determines responsibility are two different things.

Imagine you are involved in a collision with another vehicle. You believe the other driver hit you and that you are clearly not at fault. However, ICBC will assess the available evidence, including both drivers’ statements, evidence from the scene, relevant precedents and other information, before making a decision.

The final decision may be completely different from what you expected, with ICBC determining that you are fully or partially responsible. (As absurd as it may sound, sometimes that is simply how things turn out. I have seen this happen to friends and clients, and I even still have video footage of some of these incidents.)

If you have Collision coverage, subject to your policy terms, you can use it to address damage to your own vehicle even if you are found partially or fully responsible for the accident. Your applicable deductible will still apply.

But what if you do not have Collision coverage?

Suppose ICBC determines that both drivers are 50% responsible. You may find yourself in an uncomfortable position:

• Settle privately: You believe you did nothing wrong, yet you are expected to pay out of pocket to repair the other person’s vehicle. Naturally, that may feel unfair and frustrating.
• Handle it through ICBC: You may still have to bear the portion of your own vehicle repair costs associated with your share of responsibility. Your future insurance premiums may also be affected, depending on the circumstances.

In other words, you may not want to pay privately, yet without Collision coverage, you may have to pay for the portion of your own vehicle damage that you are responsible for.

This is why I believe Collision coverage matters: you cannot control how responsibility will ultimately be determined, but having the appropriate coverage can help reduce the financial burden of vehicle damage after an accident.

2. Is Collision Coverage Less Worthwhile for Older Vehicles?

This is an important factor to consider when deciding whether to purchase Collision coverage.

Imagine you own a new vehicle worth $40,000 and an older vehicle worth approximately $5,000.

If both vehicles are involved in a serious accident, the potential financial impact of not having Collision coverage could be very different.

For a new vehicle, a serious accident could leave you facing tens of thousands of dollars in losses. For that reason, I would strongly advise against dropping Collision coverage without careful consideration.

However, if your vehicle is only worth a few thousand dollars and your annual Collision premium exceeds $1,000, it may be worth doing the math.

For example:

• Current vehicle value: approximately $5,000
• Annual Collision premium: $1,200
• Total premiums over five years: $6,000

Over five years, the premiums alone would exceed the vehicle’s current value.

However, this does not automatically mean going without Collision coverage is the better choice. You cannot predict when an accident will happen, how much repairs will cost at that time, or what your vehicle will be worth.

The real question is not how much you have paid in premiums in the past, but this: If your vehicle were written off tomorrow, could you afford to absorb the loss yourself?

If you have sufficient savings to replace your vehicle without affecting your daily life, cancelling Collision coverage may be a reasonable decision for you.

However, if your vehicle is essential to your work and daily life, and you do not have enough savings to absorb the loss, I would be more inclined to recommend keeping the coverage.

3. Do Not Just Calculate the Premium. Consider How Much Risk You Can Afford to Take.

Suppose you could save $1,200 a year by dropping Collision coverage. On the surface, that may seem like a good deal.

But if you are involved in an accident one day and have to pay thousands of dollars in repair costs yourself—or even replace a written-off vehicle—the savings you accumulated over the years could quickly be wiped out by a single incident.

Of course, having Collision coverage does not mean making a claim will always be financially worthwhile. You still need to consider your deductible, repair costs, vehicle value and the potential impact a claim could have on your future premiums.

However, the purpose of insurance is not to guarantee that you get back all the premiums you pay each year. It is to reduce the financial risk you face when a significant loss occurs.

Think of it like carrying an umbrella. If you bring one and it does not rain, it may seem unnecessary. But when a heavy downpour arrives, you will be glad you have it.

That is the nature of insurance. It can sometimes feel like you are betting against the insurance company, and in many years, you may pay premiums without making a claim. Nevertheless, you cannot ignore the possibility of an unexpected loss.

The premiums you save are certain, but the financial loss you could face after an accident may be far greater than the amount you saved.

4. As an Insurance Broker, What Would I Recommend?

To be transparent, purchasing Collision coverage does affect an insurance broker’s commission, although the difference may not be as significant as you might think. However, I do not believe clients should be advised to purchase a particular coverage simply because of the commission involved. In my view, that would be unprofessional.

If you asked for my professional opinion, I would first look at your vehicle’s value, Collision premium, deductible and actual driving needs before helping you evaluate your options.

If you asked for my personal financial perspective, I would suggest looking at your savings first. If your vehicle were involved in a serious accident tomorrow, could you afford to pay for the repairs or replace the vehicle yourself?

For new vehicles, or for drivers who cannot easily absorb the financial loss of vehicle damage, I would be more inclined to recommend keeping Collision coverage.

For older vehicles with lower values, cancelling Collision may also be a reasonable decision after careful consideration, particularly if the premium is relatively expensive and you have sufficient savings to cover a potential loss.

What I would not want is for clients to assume that their premiums have been wasted simply because they have not made a claim over the past few years.

The real question is not, “Have I ever used this coverage before?” It is, “If I need this coverage tomorrow, can I afford the consequences of not having it?”

Conclusion: You Can Go Without Collision Coverage, but Do Not Cancel It Just to Save on Premiums

Before deciding whether to purchase Collision coverage, I recommend considering the following factors:

• Vehicle value: How much is your vehicle worth today?
• Cost of coverage: How much is your annual Collision premium, and what is your deductible?
• Financial capacity: If your vehicle required major repairs or were written off, could you afford to cover the loss yourself?
• Risk tolerance: Are you comfortable accepting the financial consequences of going without Collision coverage?

If your vehicle has a low value, the premium is relatively expensive, and you have sufficient savings, cancelling Collision coverage may be a reasonable choice.

However, if you cannot easily absorb the financial loss of vehicle damage, I would encourage you to think carefully before giving up coverage that could make a significant difference when you need it most—all to save a little over $1,000 a year.

Insurance is not just there to protect you when you are at fault. It is also there to help you deal with those accidents where you believe you did nothing wrong, only to discover that the final outcome may be very different from what you expected.