Author Topic: When to drop comprehensive/collision car insurance...  (Read 12213 times)

joshskies

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When to drop comprehensive/collision car insurance...
« on: November 02, 2018, 02:38:24 PM »
My insurance is coming up for renewal and my cars is of the late 2000's vintage. Definitely not old enough to throw away and take for granted, but at the same time, it isn't worth that much. (Private party resale value as of 2018: 07 sedan ~$4k).

Looking at the premiums on comprehensive and collision at a $1000 deductible with collision, the national average is $192 for comprehensive, and $526 for collision giving a total cost of $723 per year on top of your liability insurance - just at $60/mo. Given the car values, the insurance would provide a three thousand on a payout during a claim.

I've read online that the rule of thumb is to drop the comprehensive coverage when the premiums are greater than 10% of your potential payout. i.e. on a $4000 car, at  $723/yr premium with a $1000 deductible, 723/(4000-1000) = 24.1% therefore I should drop the coverage. Of course, it also recommends to save this money and on an average of one major accident every 11 years, it would be enough to put a good chunk towards a replacement car (notwithstanding you should never get into debt for a depreciating "asset").

Any thoughts on this?

PDXOregon

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Re: When to drop comprehensive/collision car insurance...
« Reply #1 on: November 02, 2018, 05:16:23 PM »
Drop the collision/comprehensive and max out the uninsured liability to your highest limits.  Consider looking into an umbrella policy that may have an uninsured motorists protection with higher limits above your auto policy.  I don't know the umbrella option for greater liability protection is offered for auto policies anymore.  Perhaps other members can comment as well as other recommendations. If you are in a collision that totals your car,  sign the title and give it to the scrapyard when they give you 250.00 for the car. if you don't care to part out the car yourself. 

IzzyEsq

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Re: When to drop comprehensive/collision car insurance...
« Reply #2 on: November 05, 2018, 07:53:46 AM »
I agree completely with PDXOregon.  I wouldn't pay for collision/comprehensive for a car of that age.  You're much better off setting money aside as self-insurance in the event you damage or total the car yourself.  I would absolutely max out your liability and uninsured/underinsured motorist coverage though -- it's exactly what I do.  I do it not just because I want to be responsible in the event I injure someone else or damage their property, but because I want to be protected if I get injured by someone who ISN'T responsible enough to carry adequate liability insurance.  I'm an attorney with a firm that represents injured people, and I have to tell you -- getting severely injured by someone without insurance is a THING THAT HAPPENS.  A lot.  So yeah, I carry hefty primary liability/UM/UIM coverage and a $1 million umbrella on top of that.
All the best,
Brenda

Cheezus

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Re: When to drop comprehensive/collision car insurance...
« Reply #3 on: November 06, 2018, 09:11:13 AM »
You insure against catastrophe.  You don't insure a $3,000 item unless that would be financial catastrophic for you.

Insurance is like gambling.  It's setup for the house to win.  Obviously.  Insurers can't pay out more than they take in.  So if you are going to gamble/insure, you do so for something that would be a disaster.  Like your liability coverage, medical, etc.

I personally disagree with maxing out uninsured motorist coverage.  Your biggest expense is medical and your health insurance will cover that (minus deductibles/etc.)  For example, maxing out like suggested would raise my insurance $2,000/year.  A major accident every 11 years would be $22,000 in additional insurance costs.  Compounding the interest, that's $45,000 over 11 years.  My maximum out of pocket for health insurance is $10k or so.  Plus, in Florida, we have PIP, which covers $10,000.  To me, expensive uninsured motorist coverage, is a bad gamble.  But every scenario is different.  However, holding a lower amount of uninsured is probably not a bad idea depending on the numbers.
« Last Edit: November 06, 2018, 09:20:59 AM by Cheezus »

IzzyEsq

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Re: When to drop comprehensive/collision car insurance...
« Reply #4 on: November 07, 2018, 08:35:51 AM »


I personally disagree with maxing out uninsured motorist coverage.  Your biggest expense is medical and your health insurance will cover that (minus deductibles/etc.)  For example, maxing out like suggested would raise my insurance $2,000/year.  A major accident every 11 years would be $22,000 in additional insurance costs.  Compounding the interest, that's $45,000 over 11 years.  My maximum out of pocket for health insurance is $10k or so.  Plus, in Florida, we have PIP, which covers $10,000.  To me, expensive uninsured motorist coverage, is a bad gamble.  But every scenario is different.  However, holding a lower amount of uninsured is probably not a bad idea depending on the numbers.

I hear people say this all the time.  "Why would I pay for uninsured motorist coverage if I have health insurance?"  I'll tell you why.  It's because there are a lot of expenses associated with catastrophic injury that aren't covered by health insurance.  Death, for instance.  If you have family members who depend on you financially, you should carry UM/UIM coverage to help them in the event you get killed in a car crash (god forbid).  If you don't die, there's all sorts of other stuff that doesn't get covered by health insurance that you might need.  We have cases all the time where people suffer permanent catastrophic disabilities, such as amputations, traumatic brain injury, paraplegia, etc. that leave them needing adaptive housing and adaptive transportation -- none of which is paid for by health insurance.  Health insurance isn't going to build you a bathroom that will accommodate your disabilities, or buy you a house that you can actually live and move around in.  It's not going to buy you a van or vehicle that will transport you if you are wheelchair-dependent or need other mechanical accommodations.  Health insurance also doesn't cover lost wages or lost future earning capacity, both of which can be substantial elements of damages, especially for high income earners.  And these are just the potential economic damages.  Health insurance also doesn't cover other damages, like pain and suffering, nor is it going to cover the damages your family members may be entitled to for loss of your support and services, let alone their own distress over what happened to you.

I carry as much UM/UIM coverage as I can get my hands on because I've seen what can happen to people and their families if they don't, and it's why I advise others to do the same.
All the best,
Brenda

Cheezus

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Re: When to drop comprehensive/collision car insurance...
« Reply #5 on: November 09, 2018, 04:41:47 AM »


I personally disagree with maxing out uninsured motorist coverage.  Your biggest expense is medical and your health insurance will cover that (minus deductibles/etc.)  For example, maxing out like suggested would raise my insurance $2,000/year.  A major accident every 11 years would be $22,000 in additional insurance costs.  Compounding the interest, that's $45,000 over 11 years.  My maximum out of pocket for health insurance is $10k or so.  Plus, in Florida, we have PIP, which covers $10,000.  To me, expensive uninsured motorist coverage, is a bad gamble.  But every scenario is different.  However, holding a lower amount of uninsured is probably not a bad idea depending on the numbers.

I hear people say this all the time.  "Why would I pay for uninsured motorist coverage if I have health insurance?"  I'll tell you why.  It's because there are a lot of expenses associated with catastrophic injury that aren't covered by health insurance.  Death, for instance.  If you have family members who depend on you financially, you should carry UM/UIM coverage to help them in the event you get killed in a car crash (god forbid).  If you don't die, there's all sorts of other stuff that doesn't get covered by health insurance that you might need.  We have cases all the time where people suffer permanent catastrophic disabilities, such as amputations, traumatic brain injury, paraplegia, etc. that leave them needing adaptive housing and adaptive transportation -- none of which is paid for by health insurance.  Health insurance isn't going to build you a bathroom that will accommodate your disabilities, or buy you a house that you can actually live and move around in.  It's not going to buy you a van or vehicle that will transport you if you are wheelchair-dependent or need other mechanical accommodations.  Health insurance also doesn't cover lost wages or lost future earning capacity, both of which can be substantial elements of damages, especially for high income earners.  And these are just the potential economic damages.  Health insurance also doesn't cover other damages, like pain and suffering, nor is it going to cover the damages your family members may be entitled to for loss of your support and services, let alone their own distress over what happened to you.

I carry as much UM/UIM coverage as I can get my hands on because I've seen what can happen to people and their families if they don't, and it's why I advise others to do the same.

What if someone hits you while out jogging?  Is your auto insurance going to cover the transport van you have to buy?

My point is, you can get injured in all sorts of different ways.  That's called life.  Life happens.  But I'm not sure piling high UM coverage is sound advice.  I would agree that SOME is probably a good idea.  And if you are somewhere that insurance is actually cheap or very high income, then maybe loading up is a great idea.  There is no one size fits all answer.

jekamom

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Re: When to drop comprehensive/collision car insurance...
« Reply #6 on: November 10, 2018, 05:10:03 AM »
My rule of thumb is decide what risks are most important to avoid for you, now.  Some folks want to avoid them all.  Some folks would rather wing it and don't think anything will happen to them.  In my state (Alabama) the percentage of uninsured motorists is high. Uninsured coverage doesnt pay for collision.  If you depend on your one $4000 vehicle and can't manage getting to work and the kids to school without it and it would be a hardship to be without it, then buy comprehensive and collision, and keep saving in a car fund (assuming you already have an emergency fund) until you CAN swing going out and replacing your car immediately with no help if you are the victim of a car theft or a tree crushing it or an uninsured driver.  Enough in the emergency fund for two weeks of uber and a replacement vehicle, then decide if you want all that money used up when someone without insurance hits you or if you are the victim of a hit and run. If so, drop rental reimbursement and collision and comprehensive, or split the risk and raise your deductibles. 
And make sure this is the best way to save a few hundred dollars NOW.  Maybe eat out less, drive less, read more books, sell some stuff you don't use, play with your kids in the yard or get a flu shot and a check up so you don't die.  Be so valuable to your friends that they will jump at the chance of helping out and filling a vehicle gap for you for a week or so. 
Remember your credit score and driving record impact your property and casualty rates.  Slow down, stay focused on the road, pay your bills, reduce your debt. 
If you owe money on your car, you are required to carry comprehensive and collision by the lender.

IzzyEsq

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Re: When to drop comprehensive/collision car insurance...
« Reply #7 on: November 12, 2018, 08:05:22 AM »
Quote
What if someone hits you while out jogging?  Is your auto insurance going to cover the transport van you have to buy?

Actually, UM/UIM policies often have coverage for auto/pedestrian crashes.  It's also not that expensive, at least in Ohio.  I'm paying less than $50/year for $500,000 in base UM/UIM coverage for two cars and two drivers (weirdly, I pay more for the umbrella, but my total outlay for $1.5 million in coverage is less than $200).  And it's worth remembering that "life happens" (at least in the form of catastrophic auto crashes) often enough to keep me in a job helping to get people compensated when life happens to them.

Just saying.  Of course, the types of insurance available in a particular state, and the costs involved, will vary.  Still, I think it's a very sound practice to be aware of the coverage available for this type of all-too-common risk and then make your decision based on your own assessment of what you are willing to self-insure.
All the best,
Brenda

Cheezus

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Re: When to drop comprehensive/collision car insurance...
« Reply #8 on: November 13, 2018, 08:51:29 AM »
Quote
What if someone hits you while out jogging?  Is your auto insurance going to cover the transport van you have to buy?

Actually, UM/UIM policies often have coverage for auto/pedestrian crashes.  It's also not that expensive, at least in Ohio.  I'm paying less than $50/year for $500,000 in base UM/UIM coverage for two cars and two drivers (weirdly, I pay more for the umbrella, but my total outlay for $1.5 million in coverage is less than $200).  And it's worth remembering that "life happens" (at least in the form of catastrophic auto crashes) often enough to keep me in a job helping to get people compensated when life happens to them.

Just saying.  Of course, the types of insurance available in a particular state, and the costs involved, will vary.  Still, I think it's a very sound practice to be aware of the coverage available for this type of all-too-common risk and then make your decision based on your own assessment of what you are willing to self-insure.

I'd pay $50/year and advise just about anyone to do the same.  It would cost me roughly $2,000/year for the same coverage where I live.  I agree that you should review the options available and make wise decisions.  Again, there is no one size fits all answer.