I plan on having my 5 year old Honda Civic paid off sometime this year, and I’m considering dropping some insurance once that happens. I figure I can save about $500 a year by getting rid of the comprehensive and collison portions of the insurance and only keeping liability. I’m trying to decide if this is a good idea, and wondering if there is any kind of rule of thumb to decide if a car’s value makes it worth insuring.
I think the car is worth about $8000 right now, and my deductibles are $500. After having both my front and rear bumpers damaged in seperate incidents, and both times having the repair costs be less than the dedcutible costs (so insurance wouldn’t pay for anything), I’m starting to question the value of insurance to me.
I do realize that if I ended up totaling my car, or if it was stolen or something, I am leaving the possibilty that I could be out a car and have nothing to show for it. I guess in a worst case scenario where my car is a total loss, I’d be out $7500 if I didn’t have the insurance. I’m just trying to decide if that is a risk worth taking.
If I did need to replace my car without insurance, I do have enough money in the bank for a decent down payment on a replacement, or to even buy a used replacement with cash.
Does $8000 sound like too expensive of a car not to carry the extra insurance?
The rule of thumb says that insurance coverage is a good idea if you can’t afford to cover the loss and/or you feel your chance of loss is meaningfully higher than the average.
So the answer is: it depends. Are you an average or safer-than-normal driver? Can you afford to deal with the case where your car is a total loss and another party is not at fault? If these things are true, by cancelling collision coverage you will benefit in the long run.
But not necessarily in the short run - for all you know, your car could be crushed by a metorite next week.
Maybe this is a silly question, but why not switch to a higher deductible, like $1K? This would mean, or course, that you would have to cover minor accidents out of your own pocket, and you would really only have insurance against total loss. But it sounds like total loss is the only risk that you’re worried about, and you’re fine with fixing the smaller things yourself.
As Xema says, a lot depends on you being honest w/ yourself, about your driving habits. If you’re a defensive driver w/ no serious accidents, or moving violations, in your past, then it’s probably a good idea. If your aggressive, speed frequently and often have close calls, it’s probably not. Remember, if you do have an accident, and it’s the other guys fault, you will probably be covered by the their policy. The only other coverage you might consider is uninsured motorist. Some places it’s required, others it’s optional.
I’d think twice about the comprehensive though. It’s fairly inexpensive w/ the max. deductable and it covers theft, vandalism, fire, etc. If you have a loss to any of these, you’re only out the deductable.
Also, many people forget that their homeowners/renters insurance may cover the contents of a vehicle, such as luggage, a laptop, etc.
Definitely check on changing your deductible. When I went to change my insurance to liability after paying off the car, my agent ran some numbers and it was cheaper to keep the comprehensive with a gargantuan deductible than to switch to liability. And I got better medical/uninsured/etc. coverage. (The net effect would have been the same as far as buying a new car - the deductible was higher than my PoS was worth, so nothing would have been paid if I totalled the car on my own.)
Raise your deductible sure, but increase coverage on collision, property damage, medical - the “minimum required by law” is ridiculously low in many states.
The key to all insurance is to remember that on average you will lose. That’s how insurance companies make money, the odds are in their favor.
So you only want to insure for losses that would cripple you, not for ordinary things which might be painful but you could still afford.
So, when the car is new and being financed you need coverage to pay off the loan if the car is totaled. But once it is paid for, and you have enough to put down to buy a new one, you no longer need coverage on it or its contents, just liability and personal injury.
I haven’t had a wreck in eons (furiously knocking on wood) so I dropped full coverage on my car two years after I bought it when I paid it off. My exposure is limited in that my car is six years old and I JUST broke 50K miles. If my car is totaled I could pick up a used car quickly and not be hurt financially.
OTOH, Mr. AdoptaMom has totaled his last two trucks (neither time was he at fault) but his exposure is much, much higher. His puts serious mileage on his truck (150K in five years). Since Mr. AdoptaMom is self employed AND 6’7" (which makes finding a truck he fits in time consuming and sometimes more expensive) it’s important that we are able to secure another truck ASAP with minimal fuss and financial upset. Every day that he misses work directly impacts our checkbook so we maintain full coverage for him.