When to keep collision/comprehensive insurance?

dragoncar · Post by **dragoncar** » Wed Dec 01, 2010 2:01 am

Here are my specifics:
Car: 2003 Honda - Kelly Blue Book says it's worth 11-12k in a private sale. I have no idea what the Geico adjuster would give me.
Premiums: Collision+comprehensive premiums are $400/year.
Risk: I do not depend on a car for work, and could easily afford a replacement out of pocket. I am not the best driver, but have a clean record (I've gotten into a couple damage-free collisions which were my fault).
The internet says to keep collision/comprehensive insurance as long as the car value is greater than 10 times the annual premiums. This means that I should be willing to pay up to around $1000/year in just collision? Seems kind of crazy to me. $400/year isn't breaking my budget by any means, but for some reason I'm still leaning towards dropping the coverage. On the other hand, a small collision involving air bags could total the car (they are extremely expensive to replace, I have like four of them in the car, and I believe you must replace them to stay road-worthy). I also feel like I may be a higher risk than I appear to the actuaries. On the other hand, a total loss would be a good excuse to go car-free or get a much cheaper beater.
Yes, the easiest solution may be to sell the car, but I'm not quite ready for that yet... and will likely try to keep it in the family in any event.

George the original one · Wed Dec 01, 2010 5:26 am

> Risk: I do not depend on a car for work, and could easily

> afford a replacement out of pocket.
For me, that says it all. My personal threshold is when the car is about $5k-6k in value.

HSpencer · Post by **HSpencer** » Wed Dec 01, 2010 7:21 am

I carry comprehensive, uninsured driver, and liability. I am multiple car discounted, accident free discounted, insured home and autos discounted. I have three vehicles, car, truck, SUV. Average market value of vehicles is 7-8K each. Premium for 6 months is $475.00. I drop collision on a vehicle when market value falls below 10K, because if the accident is my own fault, and I want it fixed, I can pay a body shop to repair it out of my own funds.

I carry a $750.00 deductible. I can pick up a pretty good replacement vehicle for under 10K pretty easily. This system seems to work best for me at least.

AlexOliver · Post by **AlexOliver** » Wed Dec 01, 2010 8:15 am

Personally, I wouldn't have collision unless I was a crappy driver. If someone else hits you, isn't it on their liability and their insurance has to pay it?

dragoncar · Post by **dragoncar** » Wed Dec 01, 2010 10:26 am

Interesting that two answers so far have been in terms of car value (i.e. can I afford to replace it) and nobody has mentioned the ratio of premiums to car value.
The way I see it for my numbers, GEICO thinks my chances of a total at-fault loss are (400/11000) = 1 in 27.5 years. I'm not an actuary, so maybe I'm missing something about this calculation (obviously the car will depreciate over time, but the premiums will decrease as well).
I'm an OK driver, but I still get tired, have near misses, etc. on occasion. I've never totaled a car, but I think the odds are over 50% that I will total a car in the next three decades (if I continue driving). Maybe I'm overestimating my risk... but that doesn't sound very human of me, now does it?
BTW, I have a $500 deductible... $1000 didn't save me much at all. Also, when I say I can "afford" to replace it, I mean I have that much in liquid assets. It would be a hit to ERE that I probably would choose to avoid.

RightClawSouth · Post by **RightClawSouth** » Wed Dec 01, 2010 11:37 am

If you drop collision / comprehensive you can also have problems even if you are in an accident that was totally someone else's fault.
I dropped collision and comprehensive and my car got totaled by someone else. He didn't have enough insurance to cover the damage to my car and the 2 others that were damaged in the crash. Normally if you have full coverage (collision or comprehensive, not sure which) then your insurance picks up the difference. I had to sue him to get him to pay for my car. HUGE pain in the ass and I was in a terrible negotiating position because he was represented by a lawyer from his insurance company who could threaten to tie me up in red tape for years.
Not necessarily a reason to keep collision and comprehensive but certainly something to consider.