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Is collision insurance worth keeping on my car?

December 21, 2012: 6:30 AM ET

I have a 2008 Honda Accord with about 24,000 miles that was purchased in 2007. The last payment has been made. Should I drop the collision insurance on the car? I have read that if a vehicle is five years old that coverage is not needed. — Welton S.

A good rule of thumb is to keep collision coverage until its annual cost exceeds 10% percent of the value of your vehicle, says Philip Reed, Senior Consumer Advice Editor at, an online auto site based in Santa Monica, Calif.

According to the Kelley Blue Book, a 2008 Honda Accord sedan is worth about $12,000 in fair condition. So if you're spending more than $1,200 a year on collision insurance, consider dropping that coverage. "But that 10% guideline is pretty conservative," says Reed. "If you're in cost-cutting mode, then you might want to drop collision when it costs 7% or 8% of the value of the car."

One last consideration: Take a look at your driving record before making changes. "If you've filed claims like this in the past, you might do it again," says Reed.

— Austin Kilham

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