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Old 10-10-2011, 02:59 PM   #1
JEDI
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Default Full coverage insurance on a paid off car is a ripoff?

From this thread:
http://forums.anandtech.com/showpost...5&postcount=52

If so, WHY?
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Old 10-10-2011, 03:15 PM   #2
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That's a very stupid generalization.

Full coverage is unnecessary if the loss of the car would not be detrimental financial burden.

If you have a car worth 5k and you total it tomorrow, you're out 5k. If that 5k is an amount that you can easily withdraw from a bank account to buy a new car, then full coverage may not be necessary for you. But if you can't afford to replace your car tomorrow (and assuming insurance isn't prohibitively expensive), you'd be stupid to not carry full coverage.
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Old 10-10-2011, 03:26 PM   #3
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I have full coverage on my Jeep that's worth about $3000. I can't afford to buy another vehicle out of pocket.
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Old 10-10-2011, 03:51 PM   #4
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Quote:
Originally Posted by DeviousTrap View Post
Full coverage is unnecessary if the loss of the car would not be detrimental financial burden.

If you have a car worth 5k and you total it tomorrow, you're out 5k. If that 5k is an amount that you can easily withdraw from a bank account to buy a new car, then full coverage may not be necessary for you. But if you can't afford to replace your car tomorrow (and assuming insurance isn't prohibitively expensive), you'd be stupid to not carry full coverage.
That's exactly correct.
It's the whole point of insuring anything, to financially cover you for an expense you couldn't otherwize afford.

It boils down to gambling...
The insurance company is betting they won't have to pay out.
You're betting they will have to pay out.
The premiums are the ante to stay in the game.
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Old 10-10-2011, 03:53 PM   #5
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Ehhh ... I would say it simply depends... If my car is paid off and worth 10K, I will still continue to carry full coverage if it costs me $20 a month....

If my car is paid off and worth 5K, I wouldn't consider full coverage if it was $80 more per month.....

note: I have a 4 banger, I'm 31, I have a clean driving record.... so my insurance is not very much ....
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Old 10-10-2011, 04:31 PM   #6
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Quote:
Originally Posted by DeviousTrap View Post
If you have a car worth 5k and you total it tomorrow, you're out 5k. If that 5k is an amount that you can easily withdraw from a bank account to buy a new car, then full coverage may not be necessary for you. But if you can't afford to replace your car tomorrow (and assuming insurance isn't prohibitively expensive), you'd be stupid to not carry full coverage.
Don't just think of it straight cash. You should include credit as well.

I mention this because sometimes the insurance just doesn't make any sense. My brother's girlfriend was paying something like $2000/yr for comprehensive but her car was only worth maybe $2500 at best. That just doesn't make sense. It would be a better idea to not have insurance on it then use your line of credit to replace it if something bad happens.

Right now the blue book value of my car is more than 10x the cost of the insurance, so the insurance makes sense IMO.
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Old 10-10-2011, 04:51 PM   #7
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you need to compare the extra cost of carrying collision vs a total loss on the vehicle.

On my beater car, worth about 2 grand, it was an $18/month premium to carry collision. this equates to 216 bucks a year. My deductible is $500, so essentially was it worth it for me to pay 216 bucks a year to protect me from a potential $1500 loss? no it wasn't so I simply carried liability and dropped collision from my policy
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Old 10-10-2011, 05:45 PM   #8
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Originally Posted by Zivic View Post
you need to compare the extra cost of carrying collision vs a total loss on the vehicle.

On my beater car, worth about 2 grand, it was an $18/month premium to carry collision. this equates to 216 bucks a year. My deductible is $500, so essentially was it worth it for me to pay 216 bucks a year to protect me from a potential $1500 loss? no it wasn't so I simply carried liability and dropped collision from my policy
Kelly Blue book says my 2005 Mazda3 is worth $7k and i'm paying $20/month in collision w/$250 deductible. (Going to $500 deductible only saves me $4/month)

yeah, i think it's worth it for me.

Thx ATOT Garage!
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Old 10-10-2011, 07:34 PM   #9
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My car is worth about $6k. Collision coverage costs me less than $200 a year.
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Old 10-10-2011, 08:15 PM   #10
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The problem with full coverage is that there is an adverse selection issue. People who are bad drivers are (in theory) more likely to buy full coverage. As a result the premium for full coverage is based on the risk of a worse than average driver. This makes it a bad deal for an average driver or better than average driver.
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Old 10-10-2011, 09:11 PM   #11
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Originally Posted by the DRIZZLE View Post
The problem with full coverage is that there is an adverse selection issue. People who are bad drivers are (in theory) more likely to buy full coverage. As a result the premium for full coverage is based on the risk of a worse than average driver. This makes it a bad deal for an average driver or better than average driver.
uh, what?
People get full coverage because the yare leasing/paying for their car and their loan agreement states that they carry full coverage.

Are you guys factoring in with liability only medical payments for yourself if you cause an accident?
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Old 10-10-2011, 09:18 PM   #12
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Originally Posted by the DRIZZLE View Post
The problem with full coverage is that there is an adverse selection issue. People who are bad drivers are (in theory) more likely to buy full coverage. As a result the premium for full coverage is based on the risk of a worse than average driver. This makes it a bad deal for an average driver or better than average driver.
Dumbest post I've ever read here. Congrats, u am stupid.
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Old 10-10-2011, 10:05 PM   #13
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uh, what?
People get full coverage because the yare leasing/paying for their car and their loan agreement states that they carry full coverage.

Are you guys factoring in with liability only medical payments for yourself if you cause an accident?
Doubtful since that has nothing to do with collision. Collision coverage is for the vehicle itself, and potentially a limited class of items within it. Mine covers luggage and clothing you may have in the car, oddly.
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Old 10-10-2011, 11:15 PM   #14
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Car paid off? Get liability and comprehensive, then put the cash you'd normally spend for collision in the bank. If something goes wrong, pay for it out of the bank money. After a while, take the money you have saved and trade in your old car for a newer one and start over again.
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Old 10-10-2011, 11:30 PM   #15
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I got full coverage on 2 10+ year old cars for about $550/yr. At those rates, it makes little sense NOT to have full coverage to me.
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Old 10-11-2011, 06:22 AM   #16
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Originally Posted by DeviousTrap View Post
That's a very stupid generalization.

Full coverage is unnecessary if the loss of the car would not be detrimental financial burden.

If you have a car worth 5k and you total it tomorrow, you're out 5k. If that 5k is an amount that you can easily withdraw from a bank account to buy a new car, then full coverage may not be necessary for you. But if you can't afford to replace your car tomorrow (and assuming insurance isn't prohibitively expensive), you'd be stupid to not carry full coverage.
This post 10 times over, spot on.
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Old 10-11-2011, 06:39 AM   #17
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Dumbest post I've ever read here. Congrats, u am stupid.
This is taught in every first year microeconomics class in the county. Insurance is the classic example of adverse selection (and moral hazard as well). You're the one who sounds stupid.
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Old 10-11-2011, 07:10 AM   #18
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This is taught in every first year microeconomics class in the county. Insurance is the classic example of adverse selection (and moral hazard as well). You're the one who sounds stupid.
Go find stats on who carries "full coverage" -> You will find it has more to do with who has a loan on the vehicle rather than what you suggest.
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Old 10-11-2011, 08:19 AM   #19
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Go find stats on who carries "full coverage" -> You will find it has more to do with who has a loan on the vehicle rather than what you suggest.
This. Also, it likely has more to do with the value of the car than anything else. IE - If a car is worth 10k or more, it more than likely has full coverage on it. If under 10k, the chances for it having full coverage are less likely. Essentially, this fits right into the assumption that if someone has the money in the bank to replace the car, they won't have full coverage if the cost/benefit isn't there. Not many people have upwards of 10k to simply throw away if they total their car. But you start looking at less and less expensive cars, and replacing a 3k dollar beater isn't a big problem.

Granted, the comments everyone else has made make sense. But it has little if anything to do with the driver. Someone who is a bad driver and behind the wheel has a 1500 dollar civic... does someone actually think they should have full coverage? If they're a proven bad driver, their rates would most likely be high, and given the low value of the car, it simply wouldn't be worth the money in most cases.
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Old 10-11-2011, 08:47 AM   #20
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I have full coverage on my Jeep that's worth about $3000. I can't afford to buy another vehicle out of pocket.
what's your deductible and how much does it cost extra to have full coverage?

Also, your car's *RETAIL* value is probably higher than what you can sell it for privately. I think a lot of times insurance has to pay you replacement cost for your vehicle.
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Old 10-12-2011, 12:50 PM   #21
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Originally Posted by the DRIZZLE View Post
The problem with full coverage is that there is an adverse selection issue. People who are bad drivers are (in theory) more likely to buy full coverage. As a result the premium for full coverage is based on the risk of a worse than average driver. This makes it a bad deal for an average driver or better than average driver.
Ridiculous. You can be the best driver and still have your car wrecked by factors outside your own control.
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Old 10-12-2011, 01:20 PM   #22
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Ridiculous. You can be the best driver and still have your car wrecked by factors outside your own control.
Parking on the street is a bad one. My right door has a scratch in it; it looks like someone was riding a bike and the handle bar scratched it. That's just superficial stuff. Someone can cause more severe damage just by bumping into your tire. The entire front end (plastic) of your car can be ripped off if someone swipes it at the right angle.

Let me tell a story of something that happened due the strange weather last year. On a residential street near my parents house, cars driving in the snow would form ruts. The temperature was going up and down a lot so warm snow would get soft and push to the sides easily then it would freeze really hard. These ruts were a good 6 inches deep. As long as you drove in the ruts, you were ok. If you hit the rut the wrong way, it would grab the car and throw it sideways. You can see this effect if you ride your bicycle parallel to a curb then hop the front tire onto the curb - the back tire will rub against the curb without hopping up and the bike will rotate.
Anyway, in one weekend alone I saw 3 separate incidents where people hit a Ford Taurus that was parked on the side of the road. These were duplexes with no garage so the road is where you had to park. I feel really bad for that guy. His car was totally mangled and it was not his fault.
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