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ask joanne

I have bought two cars in 22 years. I follow the manufacturers maintenance to the T and consequently both cars went past 300,000 km. I use them for many outdoor activities (camping/mountain biking/long-distance travel) and they tend to get pretty beat up on the inside. Both cars were taken off the road because they were involved in collisions (not my fault) causing $3,200 damage and the cars were valued at $2,750. Is there a rule of thumb as to when you should stop paying collision insurance on an older car? I was paying $600/year for $2,750 of insurance – that seems like a rip-off. – Joe in Sarnia, Ont.

Congratulations. To get that mileage from your vehicles means you must be doing something right, and it seems that you're definitely getting the most value from your automotive purchases. You're right to make sure you are not spending unnecessarily on insurance as your car gets older.

Let's remember the basics when it comes to collision insurance for a car that you own. "By law, under the Insurance Act, you don't have to purchase 'physical damage insurance' – which is also known as collision or comprehensive," says Anne Marie Thomas, a manager at

Collision covers the repair or replacement cost of your vehicle if you're involved in an at-fault accident. What if you're involved in a collision and not at fault? "In Ontario, if you're not at-fault and you don't have collision insurance you're still covered; the section of your policy that responds in that case is called the direct compensation section," says Thomas.

There is, however, an exception. "One thing for the consumer to be aware of is if you're hit by an unidentified third party, also known as a hit-and-run, even though you're not at fault, that type of loss is paid out under the collision section of your policy," says Thomas.

Making a decision about when to stop paying collision insurance on an older vehicle is a matter of doing your due diligence. You need to consider the maximum an insurance company will pay if you're involved in an at-fault accident and your vehicle is written off.

Searching your local automotive classified ads should put you in the ballpark. Then work through the math and make the decision. Look at the cost of a replacement, your premium, the deductible, the settlement you'd receive and consider the likely increase in your insurance costs if you make a claim.

If you find that the average cost to replace your car is $2,000, subtract your deductible, which is the amount you'd be required to pay in an at-fault accident before an insurer covers any expenses. Let's say your deductible is $500. Then subtract the collision portion of your insurance premium – say it's $200 per year. So if you have a loss, in this example, you'd net $1,300 in compensation.

The example above is only based on paying for collision insurance for one year. If you remain accident-free through year two, three, four and beyond and meanwhile your car is depreciating, you're spending more money for less coverage every year.

It sounds as though you haven't been at fault for an accident in 22 years, but you can't be sure it won't happen at some point. Though it is reduced by safe driving and proper maintenance, there is always a risk. For those who live with minimal cash reserves, an insurance settlement might be essential to getting back on the road and so the risk offset of a collision premium each year is a good option.

There's no rule of thumb, it all comes back to math – and the amount of financial risk you're willing to or can absorb.

E-Mail your car questions to Ask Joanne at

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