Should I Carry Collision Insurance for My Low Value Car?

Auto insurance is one of the unavoidable costs of owning your car and by law you must have insurance. According to the Financial Services Commission of Ontario, if you own a vehicle in Ontario, you are required to, at the very least, purchase the following automobile insurance coverage:


Old car dashboard


Third-Party Liability Coverage:

Protects you if someone else is killed or injured or their property is damaged. It will pay for claims as a result of a lawsuit against your up to the limit of your coverage and will pay the cost of settling the claims. By law, you must carry a minimum of $200,000 in Third-Party Liability coverage.

Statutory Accident Benefits Coverage:

Provides you with benefits if you are injured in an automobile accident, regardless of who caused the accident including supplementary medical, rehabilitation, attendant care, caregiver, non-earner and income replacement benefits.

Direct Compensation-Property Damage (DC-PD) Coverage:

Covers damage to your vehicle or its contents, and for loss of use of your vehicle or its contents, to the extent that another person was at fault for the accident. It is called direct compensation because even though someone else causes the damage, you collect directly from your own insurer instead of the person who caused the damage.

Extra Coverage:

In addition to the standard policy coverage, you can buy extra coverage for loss or damage to you vehicle, like collision coverage. If you choose to carry collision insurance on your car, this is the first line of defence in the event that you are involved in an auto collision. Even though many car owners feel that they will not be in collisions where they have to pay for damages to their own cars, you may want to reconsider because statistics suggest otherwise.

According to Transport Canada, in 2012, there were 1,823 fatal collisions and 122,140 personal injury collisions. If you have collision coverage, it pays for damages to your car in the event of an accident and if you own a vehicle that is relatively new, you should have it insured against the risk of an accident. However, if you happen to own an older vehicle with a low car value, you may opt to bypass having collision coverage added to your policy because it may not be worth the extra yearly costs in comparison to potential repair costs.

Although there are no benchmarks whether you should, or should not, have collision coverage added if you own an older car, there are some factors to consider in making this determination.

Pros & Cons Against Collision Coverage:


• If the value of your vehicle is worth less than a few thousand dollars, then it may make sense for you to pay any damage for the repair out of pocket instead of pay a premium to an insurance company.
• Depreciation takes a chunk of a car’s value over time, so if your car is worth $10,000 today, in the next five years it might only have a worth from $7,000 to $3,000, or perhaps even less. You might consider dropping collision coverage at that time because your vehicle’s worth could be less than the cost of annual premiums for collision coverage.
• If you feel that you only drive your car occasionally with relatively low mileage, you might consider yourself at minimal risk for an accident. Because of this lessened usage, your premium might cost you more than a repair out of pocket.
• You might decide that over the course of three to five years, the total annual premium for collision coverage exceeds your vehicle’s value.
• Since your car’s value is low, you consider setting up a rainy day fund in the event there is an emergency repair that occurs from an accident.
• If you have a low value car that gets into an accident, but the damage is minimal or cosmetic, you might decide to live with it instead of making costly repairs.


• At the end of the day, it is your decision whether to have collision coverage on your low value vehicle. However, if you have any concerns that you cannot deal with a major collision or replacement costs for your vehicle, then it’s prudent to be cautious and pay the insurance premium for collision coverage.