At what point does lowering auto insurance make sense?

[GrumpyMan]

My 2004 Chevy PU has been paid off for a couple of years now and I still carry full coverage insurance on it. The Kelly BB value is about $6500.00 to $8000.00. At what point does dropping Collision/Comprehensive make sense on a vehicle when paid off? I'm a safe driver and grandpa my truck around, but Houston traffic is a nightmare of course. I'm wondering what everyone else's thoughts on this are. 😕

 

[cabri]

Easy rule of thumb:
When you can afford to replace the vehicle due to any damage that is not another person's fault

 

[KentState]

Factor in the risk of you needing to replace the vehicle out of pocket vs getting the value back from insurance. For my 2003 Mazda, it saves me around $60 every 6 months by dropping insurance down which isn't worth it to me. I'd rather pay $120 a year knowing that if something happened I could go buy a replacement.

 

[cbrsurfr]

Short answer is never.

Once it's worth nothing the difference between full coverage and liability only is pretty much negligable. The bronco I had the difference was $50 a year. Not worth it.

My friend's mom gambled with liability only and lost. She hit the house backing in and caused a couple grand damage to her F150. She considered adding full coverage after that but didn't. Got some parts of the truck fixed and 1 week later hit a deer causing another couple grand in damage. At this point she was broke and only fixed what was absolutely needed. Next year she drops her phone while driving and hits a concrete barrier with a light pole and destroyed the truck. Net result was 1000's in repairs wasted only to end up with no truck just to save a couple hundred bucks.

 

[GrumpyMan]

From the research I've been doing the general consensus on my truck is when the value gets down to about $2000.00 or $3000.00 then it might not be worth it to have full coverage. I think I may just up the deductibles until then and maybe drop the rental and uninsured motorist kind of stuff which does drop it from $480.00 for 6 months to $370.00 with Geico.

 

[heymrdj]

Easy rule of thumb:
When you can afford to replace the vehicle due to any damage that is not another person's fault

This, and what others said. If you can't say "I wouldn't need the value of this car to get me into a replacement" then you shouldn't be without it. And like other's said, it's super cheap. I thought about dropping it on my 2004 Expedition, but then it got totaled and I got a 8.5K check to pay off bills. Totally worth what I was paying for it.

 

[thedarkwolf]

Well on my 89 dodge caravan that had a blue book of $400 I just had liability lol. On everything else worth $2k or more I've had full coverage. The price difference between liability and full just isn't very much. It has been awhile but I think the van was 350ish a year for the cheapest insurance I could get while my miata with full and a $500 deductible is $550 and that is a worthless minivan vs a sports car.

 

[ponyo]

I dropped it on my truck after like 6 years when it was worth like $8-10k. But that was because it was my spare vehicle and I could easily afford to repair or replace it if something happened to it. Well that was like 6 years ago so the gamble paid off. The truck is now my daily driver and I still only have liability on it.

 

[bruceb]

I have long since dropped collision on my 1999 Gran Prix, but it is still worth something, so I keep comprehensive in case of fire or theft or glass damage.

 

[Zodiark1593]

Comprehension on my 98 Volvo is only a few bucks a month (worth roughly $3500). Worth it as deer is common in my area. I did drop collision though as not only would it add another $60 to my policy, ive judged the odds of an at fault collision is relatively small vs the cost.

 

[gorcorps]

IMO you should always have full coverage. A little bit extra a month is a much easier pill to swallow than being out several grand if you need to replace it. My brother is currently having a issue where he got rear ended hard enough to have totaled his car (rear axle damage) but the other person's insurance company is fighting it. He's being forced to get a lawyer to get the money he would most likely win, but he can't afford that kind of thing. If he had full coverage he'd be out a deductible, but at least he'd have an option. Right now he's just SOL

 

[bruceb]

He should not need a lawyer. His own insurance company should fight it for him. He has liability coverage and the other driver seems to be clearly at fault. Even if it does go to court, he should easily win, including attorney costs.

 

[Herr Kutz]

It really depends on your rates. I have never had comprehensive or collision on my vehicle (still on my first vehicle, bought used in 2011 for $10.5k) since the rates were an extra ~$700 every 6 months with $1k deductible on the lowest quote I received at the time. On the high end of the quotes the extra cost was somewhere in the neighborhood of ~$1.3k extra every 6 months. Absolutely ridiculous. Heck, state minimum (liability only) coverage cost me $700 every 6 months.

I still have the same vehicle and still do not carry collision+comprehensive since it's an extra $350/6mo or so.

Those prices are with no violations, no at-fault accidents, and no lapses in coverage.

 

[Brinson]

You're purchasing peace of mind. Its just like insurance in blackjack. It never makes mathematical sense. But if you're entire life savings where on the table on the blackjack table you might would buy the insurance in blackjack, too.

Why? Because peace of mind is damn valuable.

It never mathematically makes sense to have full coverage. The insurance company is very diligent to make sure they're always charging you slightly more than the risk level associated to you. You can think you might understand your driving patterns better than they do, but they understand repair costs, depreciation, etc far better in general because they have huge teams of analysts working on it every day.

So the answer is...you should stop covering full coverage when the value of the "administrative costs" + profit for the insurance company, which is fairly low, is worth more than the peace of mind you get from having full coverage insurance. The more cars you have, the less you need that peace of mind. The lower value your cars are, the less you need peace of mind.

Insurance is very, very rarely a good gamble. I say this and people will jump out and disagree with me, but it really is basic math. So long as the insurance companies are returning profit its fairly evident. Its like vegas, the house always wins. In this case, the more they pay you out, the more they will charge you in the future to make up for it.

The bet may pay off-- go to vegas and you'll see tons of people make money off of bad bets. I waatched a guy split 10s once and get two blackjacks. But in reality without knowing whether it will or will not you're just buying security and peace of mind.

How much is it worth it to you? To most of us, its worth it for quite a while. For some people, its worth it forever. To others, they'd prefer play the odds and end up with a little more money over a long time frame.

 

[Lifted]

It really depends on your rates.

Not just rates. If you have a note on your car the financing company will almost certainly require comprehensive. Since most people finance it's not an option.

At $10.5k I'd elect for comprehensive even if I paid cash. Assuming I'm not responsible for the accident, it can take a while to collect from the insurance company of the responsible party, and that's assuming they have insurance. If they don't you're out $10.5k, and the same if the accident is your fault, or if the car is stolen, or gets water damage, or a hit and run, or ...

There's just too many things that can happen. I prefer driving my car and not having to worry about it. The cost is worth the peace of mind to me.

 

[jagec]

Comprehensive and collision are two different things. It essentially NEVER makes sense to drop comprehensive.

 

[Lifted]

Comprehensive and collision are two different things. It essentially NEVER makes sense to drop comprehensive.

You're correct, I was just being lazy. 😀

Every insurance company I've dealt with has required both to be purchased together, and I don't see why anyone would purchase one without the other.

 

[Herr Kutz]

You're purchasing peace of mind. Its just like insurance in blackjack. It never makes mathematical sense. But if you're entire life savings where on the table on the blackjack table you might would buy the insurance in blackjack, too.

Why? Because peace of mind is damn valuable.

It never mathematically makes sense to have full coverage. The insurance company is very diligent to make sure they're always charging you slightly more than the risk level associated to you. You can think you might understand your driving patterns better than they do, but they understand repair costs, depreciation, etc far better in general because they have huge teams of analysts working on it every day.

So the answer is...you should stop covering full coverage when the value of the "administrative costs" + profit for the insurance company, which is fairly low, is worth more than the peace of mind you get from having full coverage insurance. The more cars you have, the less you need that peace of mind. The lower value your cars are, the less you need peace of mind.

Insurance is very, very rarely a good gamble. I say this and people will jump out and disagree with me, but it really is basic math. So long as the insurance companies are returning profit its fairly evident. Its like vegas, the house always wins. In this case, the more they pay you out, the more they will charge you in the future to make up for it.

The bet may pay off-- go to vegas and you'll see tons of people make money off of bad bets. I waatched a guy split 10s once and get two blackjacks. But in reality without knowing whether it will or will not you're just buying security and peace of mind.

How much is it worth it to you? To most of us, its worth it for quite a while. For some people, its worth it forever. To others, they'd prefer play the odds and end up with a little more money over a long time frame.

Not valuable enough to pay an extra 13.3% of the car's purchase price every year, IMO. If you drive like a maniac, things may be different.

 

[Herr Kutz]

Not just rates. If you have a note on your car the financing company will almost certainly require comprehensive. Since most people finance it's not an option.

At $10.5k I'd elect for comprehensive even if I paid cash. Assuming I'm not responsible for the accident, it can take a while to collect from the insurance company of the responsible party, and that's assuming they have insurance. If they don't you're out $10.5k, and the same if the accident is your fault, or if the car is stolen, or gets water damage, or a hit and run, or ...

There's just too many things that can happen. I prefer driving my car and not having to worry about it. The cost is worth the peace of mind to me.

OP was talking about an old car. I hope he's not still financing a 2004...

 

[jagec]

You're correct, I was just being lazy. 😀

Every insurance company I've dealt with has required both to be purchased together, and I don't see why anyone would purchase one without the other.

Every insurance company that I've dealt with has happily written a comprehensive policy without collision, and if you're a <25 y.o. male (which I was at the time) it can make a lot of sense to opt for the cheap comprehensive to protect against theft/arson/flooding/deer strikes without paying the large amount of money that it takes to protect against your-own-dumb-fault accidents, which are covered under collision.

I agree that once you are over 25, you might as well get both on most vehicles.