Full coverage or liability for car?

[movingex]

OK my car is worth about $3,000 now per Kelly Blue Book trade in value.

I am working under the assumption that this value is correct as I don't want to debate the value.

My full coverage insurance is about $760 a year.
Liability is about $400.00 a year.

In your opinion at what point does it not make sense to go full coverage?

I'm just asking for personal opinions as I know I will have to make my own decision.

Thanks

[Dobick]

I personally am keeping full on my vehicle.

My thought process is that if I end up without a vehicle due to an accident, I would like the option of having a rental, if for no other reason...

That and the fact that the savings on a monthly basis is not so great that it would take 100 months to see a break even from the savings (3000/30=100), should your 3000 dollar car need to be replaced.

A running vehicle is almost always worth at least 2000 dollars at trade in (unless it is a total beater) so your future depreciation will not be that great.

My personal opinion is to keep full, and have a deductible you can live with in case of emergency.

[L Stegall]

I would say that at least for now, I would keep the full coverage. If you totaled your car, wouldn't you rather be out the additional nearly $400 you paid for full coverage than the $3000 blue book value (or whatever they give you). The only time I would drop full coverage is when the value of the car is so close to your premium, and then, I'd stash that difference in savings so that you do have a downpayment if the car even needed to be replaced.

We only had liability on our son's car when he was a teenager, but the car was cheap and the premiums were not.

[bondarnes]

If you cannot come up with $3K -$5K for a replacement vehicle then paying the extra premium makes sense. I worked with a fellow in the 70's that dropped full coverage as soon as his first car was paid off. He saved the premium difference and about every ten years or so he had enough saved to purchase a new car for cash. He was also a very careful driver and had never had an accident in the 40+ years he had been driving..

[jerrykr]

You might check what uninsured motorist coverage would cost you. at least that way you are covered if an accident is not your fault.

[toverman]

There's another choice, at least there was when I was driving a $4,500 car that I paid cash for. It was "comprehensive" coverage, which wasn't full coverage but covered the car if it was hailed on (which it was) or vandalized. It stopped short in any damage I caused to the car alone by driving it into a tree.

I thought uninsured motorist coverage was a requirement, and it's something I've always had: half the time an accident happens it seems like someone involved doesn't have insurance.

[jerrykr]

You are right Todd, unless things have changed Comprehensive and Collision are two different coverages, and Collision is the expensive one. I'm not sure on your question about uninsured motorist, it looks like a seperate coverage on my policy.

The best thing to do when your car gets to where it it's not worth a lot is to have a coverage review conversation with your agent every year or two. A couple of years of Collision premiums can easily cost you more than the insurance Co. would pay if your car were totaled.

[Truckman]

Originally Posted by jerrykr

A couple of years of Collision premiums can easily cost you more than the insurance Co. would pay if your car were totaled.

Very true...Remember, if your car is totalled they will want to pay you what they think it is worth, not what you think it is worth......Ben

[STP Images]

The way the insurance companies value the vehicle is important to say the least. Long story short, I purchased a 1996 Chevy extended cab, long wheelbase 3/4 ton truck that I used as the hauler for my race car trailers. I bought it brand new with 12 miles on the odometer in late 1995.

After I quit racing, I kept the truck and chose to continue to pay full coverage for the truck. When the price of gasoline started to skyrocket early this year, my wife and I discussed selling it. We ballparked a sales price of roughly $7,500.00 for a 12 year old truck with 212,000 miles on it. Even though it was high mileage, this truck was CLEAN.

Before we could place the "for sale" ad, the truck was stolen. After it remained unrecovered for 30 days, the insurance paid me "their" value of the truck - $8,600.00!

It was better than selling it! I got more from insruance than I would have listed the sale price for. Just something to keep in mind. For me, keeping the full coverage was worth it.

[C!LLY]

on my car I have full coverage, on my truck I have full coverage and GAP. I would need the extra insurance, because God forbid someone hit me and I'm not hurt, my baseball bat or golf clubs come out and I start swinging.

[jerrykr]

OK, I think it's time for a recap.

As we have said, your agent sells you the types of insurance that you request. They are all seperate, and you pick and choose which you want to pay for.

So, first off, get the estimated value of your car. If it is high, like $6000 and up (my own personal limit), carry "full" coverage. But year to year in the future, re-value what your car is worth. It will continue to drop, so you need to re-value your insurance requirements as time goes on. A good insurance agent will agree with what I say, and work with you and give you advice, and sometimes be able to save you some money.

Types of insurance:

Liability: This is REQUIRED BY STATE LAW, and is not an option. You MUST buy it. It Pays the other guy, not you, and it may keep you out of court if you are at fault in a wreck. Liability coverage is cheap, and you should ask about the price difference in the basic coverage vs the most coverage they will sell you. You will find that the cost difference between basic protection (that's what it is) and the max is very little $$$ cost to you. Lawsuits against you, and medical bills the other guy can incurr due to you being at fault in an accident can be sky high. Consider the max coverage if you can afford it.

Comprehensive. This covers your car and pays you if it is stolen, damaged in a storm, hail, vandalism, glass breakage or other damage, basically all the stuff that could happen besides having a collision. Pay attention to what it won't cover so that you don't expect it to cover you if an atom bomb hits it (act of war). In the overall cost of insurance Comprehensive is really pretty cheap, and unless you are driving a total wreck that already had that kind of damage, it's usually a good buy.

Un-insured Motorist. Usually not very expensive, and a good buy. It kicks in to cover you if you are in a collision with another driver, that driver is at fault in the wreck, and either they do not carry insurance to pay for your damages, or their insurance does not step up and pay your damages.

Collision: The insurance company carries the most risk offering you Collision, and therefore, this coverage will cost you the most. Usually 1/2 or more of the cost of "Full" coverage is for Collision. So this one is the one you want to pay the most attention to what it will cost you to carry it. You need to have your agent explain to you in what cases Collision will pay for your car, and what cases it will pay for the other guy's car. There are many situations, but usually it boils down to who was at fault. If you are at fault, your company will pay for the other guy's damages, and vice-versa. In a wreck, you need a police report if at all possible. Don't expect me to describe Collision coverage to you, your agent must make it clear to you what you are paying for, so that you can access your own risk, and what you will be willing to pay for.

I hope this helps you sort out what your are paying for and what you get out of your monthly premiums.

[bairfoot]

I've turned into such a pessimist I probably shouldn't give my $.02, but here goes. When you get to brass tacks, insurance companies just workoff the law of averages. They rely on the fact that you will pay in more than you get out...period. My wife and I carried full coverage on her SUV for a couple years after the bank gave us the title and paid cash for all the little dings because we didn't want our premiums to go up or, heaven forbid, get dropped. Long story short we got rid of the insurance company we had since we were 16 years old, and went from one full coverage and one liability to maxed out liability (in case one of us hits a Bently) for both vehicles AND uninsured motorist with the Caveman/Lizard company. Premiums went from $160 per month to less than $50 per month for both of our old cars. The uninsured motorist coverage is less than $5 per month for both vehicles. About a month after we switched one of the aformentioned uninsured motorists t-boned our Yukon. I'm very glad I decided to get the irresponsible, I mean, uninsured motorist. I'd like to say that I'm saving the difference in premiums to buy a new car, but lately I've been blowing it on cameras. In case it matters, we have a 1997 GMC Truck and a 2002 GMC Yukon. They are just transportation, not status symbols. If I wrap one around a tree I'll replace it with an older, cheaper one if necessary. Viva La Recession.

[ka5txl]

I would drop full coverage. Your car is worth $3k If you have a decent emmergency fund (3 to 6 months living expenses) you can replace the car with another $3k car. You save the excess premiums for full coverage. I always drop full coverage when the vehicle is paid for. As was mentioned I keep unresponsible (I mean uninsured motorist coverage). I had to use it once as I was driving an 11 year old truck. I was hit over in University Park by an even older Toyata (couldn't get hit by a Cadillac or a Benz) driven by a student with no insurance.

[movingex]

Thanks everyone for your input.

I went ahead and bent over and got the full coverage this time but I probably will only get liability and comprehensive in 6 months.

[jerrykr]

You don't have to wait 6 months to change your coverage. Call you agent up and discuss your situation. If they are good, I personally think they will advise you against Collision on your 3K car. It's still up to you what you want to risk/lose, and your own personal situation will be the deciding factor.

Pay attention to what Collision costs, and see just how long it would take to save yourself 3K by not paying for collision, assuming that you won't have a wreck during that time frame. That is exactly what the insurance company is doing, they are assuming that the risk of you having that wreck is low, and you have already paid them part of what they would pay you back if it happened.