Car insurance is supposed to protect you from financial disaster. Yet for many drivers, it’s just a steady silent leak in their monthly budget for protection for protection they might never need.
The average American driver now pays well over $2,000 a year for auto insurance, according to recent industry data from sources like the Insurance Information Institute. As premiums rise, insurers often respond by offering more “peace-of-mind” add-ons coverage that sounds reassuring but doesn’t always hold up under scrutiny.
That doesn’t mean all extra coverage is bad. It means understanding what you’re actually paying for matters more than ever.
Below are eight types of car insurance coverage that often don’t make financial sense, depending on your situation and how to decide whether skipping them could save you money without increasing real risk.
- Collision Coverage (When Your CarIsn’tWorth Much)
Collision insurance pays to repair or replace your car if you’re in an accident regardless of who’s at fault. It’s useful. But it’s also one of the most commonly unnecessary coverages.
Collision coverage only pays out up to your car’s actual cash value, minus your deductible.
If your car is worth $4,000 and you have a $1,000 deductible, the maximum benefit is $3,000. If you’re paying $600–$900 a year for collision coverage, the math stops working pretty quickly.
Many personal finance researchers recommend reconsidering collision coverage when:
- Your car is more than 8–10 years old
- The annual premium exceeds 10% of the car’s value
- You could afford to replace the car yourself if needed
When collision still makes sense:
If you rely heavily on your car for work and couldn’t replace it easily, a collision might be worth the cost even on an older vehicle.
- Comprehensive Coverage (For Low-Value Cars)
Comprehensive insurance covers non-collision damage: theft, vandalism, weather, falling objects, animal strikes. It sounds broad—and it is—but it has the same limitation as collision: it only pays what your car is worth.
If your vehicle has depreciated significantly, comprehensive coverage can become redundant. Paying $300–$500 a year to protect a car worth a few thousand dollars often doesn’t make sense unless:
- You live in an area with high theft rates
- You frequently face extreme weather risks
- The deductible is low enough to matter
According to claims data summarized by organizations like the National Association of Insurance Commissioners, many comprehensive claims are relatively small, meaning deductibles eat into the payout.
- Rental Car Reimbursement Coverage
Rental reimbursement pays for a rental car while your vehicle is being repaired after a covered claim.
The problem? Many people already have rental coverage elsewhere.
You may already be covered if:
- Your credit card offers rental car benefits
- Your auto repair shop provides loaner vehicles
- You can temporarily use another household vehicle
Rental reimbursement often caps at $30–$50 per day and only applies when a claim is approved. If your car is simply in the shop for maintenance or the claim is denied you’re on your own.
When it’s worth it:
If you have one car, no public transit access, and no backup options, this coverage can still be practical.
- Roadside Assistance Coverage
Roadside assistance feels like a no-brainer until you realize how many places already offer it.
AAA, auto manufacturers, credit cards, and even mobile phone plans often include roadside services. Insurance-based roadside assistance can also come with hidden downsides.
Some insurers track roadside claims separately, and frequent use can affect your premium over time even if the service itself is inexpensive.
Smarter alternative:
A standalone roadside membership often provides better coverage without tying service usage to your insurance record.
- Gap Insurance (IfYou’reNo Longer “Upside Down”)
Gap insurance covers the difference between what you owe on a car loan and what your car is worth if it’s totaled.
It’s genuinely useful but only temporarily.
Once your loan balance drops below the car’s value, gap insurance becomes unnecessary. Yet many drivers continue paying for it for years.
According to consumer finance analyses referenced by the Consumer Financial Protection Bureau, borrowers often forget to cancel gap coverage even after it no longer applies.
Rule of thumb:
If you owe less than the car’s current resale value, gap insurance is no longer doing anything for you.
- Medical Payments Coverage (If You Have Solid Health Insurance)
Medical payments (MedPay) covers medical expenses after an accident, regardless of fault.
But if you already have comprehensive health insurance, MedPay can duplicate coverage. Most health plans cover accident-related injuries, and coordination between insurers can complicate claims.
MedPay can still help with:
- High deductibles
- Immediate out-of-pocket costs
- Passengers without insurance
But for many insured drivers, it’s an extra layer that rarely comes into play.
Check your health plan first. If your deductible is manageable and coverage is broad, MedPay may be unnecessary.
- Uninsured Motorist Property Damage (In Some States)
Uninsured motorist coverage is important but property damage coverage is sometimes redundant, especially in states where:
- Collision coverage already applies
- Uninsured driver rates are low
- Property damage limits are modest
According to the Insurance Research Council, uninsured motorist rates vary widely by state, with some regions having relatively low risk.
If you already carry collision coverage, uninsured motorist property damage may not provide additional value.
- Custom Equipment or Accessories Coverage (For Stock Vehicles)
This coverage protects aftermarket upgrades, custom rims, sound systems, and performance parts.
But if your vehicle is mostly stock, you may already be covered under standard comprehensive insurance. Many drivers pay for this add-on without actually having modifications that exceed normal coverage limits. If you haven’t significantly altered your car, this coverage is often unnecessary.
How to Decide What to Cut (Without Regretting It)
The smartest way to evaluate insurance isn’t by asking, “What could go wrong?”
It’s by asking:
- What is the maximum payout for this coverage?
- How much does it cost annually?
- Could I reasonably cover this loss myself?
Insurance works best for catastrophic risk, not predictable, manageable expenses. The more financially stable you become, the less sense it makes to insure against minor losses.
Insurance Is Not Moral Protection
There’s a cultural tendency to treat insurance as a moral safety net as if being “fully covered” equals being responsible. But over-insuring is often just another form of financial anxiety.
Studies in behavioral economics show that people routinely overestimate rare risks while underestimating long-term costs. Insurance companies understand this and price accordingly.
We believe the information in this material is reliable, but we cannot guarantee its accuracy or completeness. The opinions, estimates, and strategies shared reflect the author’s judgment based on current market conditions and may change without notice.
The views and strategies shared in this material represent the author’s personal judgment and may differ from those of other contributors at IntriguePages. This content does not constitute official IntriguePages research and should not be interpreted as such. Before making any financial decisions, carefully consider your personal goals and circumstances. For personalized guidance, please consult a qualified financial advisor.
