Any Unintended Consequences to Dropping Collision and Comprehensive Insurance?

[kc27]

Hi

I have four vehicles ranging in years from 2000 to 2007. They are all in good mechanical condition, with bodies ranging from fair to excellent due to some rust, but no collision damage. Besides my wife and me, our 20 year-old and 18 year-old drive these cars, too. I have full coverage on all of these vehicles. I do have the funds available where I could replace these cars with something comparable if needed. I am considering dropping collision and comprehensive.

Have I missed any reason or benefit to keep the full coverage? Someone once told me once they felt full coverage had value even on older cars. Their reasoning was that if you have full coverage and get in an accident where it is not your fault, your insurance company will be an advocate for you in dealing with the other driver's insurance company (assuming the other driver does not have the same insurance company as you). Where if you only have liability, your insurance company has no skin in the game, and you are on your own in dealing with the other driver's insurance company. Not sure how valid that is, but if true, that would be an example of an unintended consequence.

[lost_in_the_endless_aisle]

I'm kind of curious about other answers as well (since I ditched comprehensive years ago) but wouldn't umbrella insurance fill any gaps that emerged? I have $1M umbrella for ~$9/mo, which is less than comprehensive car insurance would incrementally costs and covers a bunch more (outside of car value, which in my case, is nearly nothing anyway).

[SimpleCycle]

I'm kind of curious about other answers as well (since I ditched comprehensive years ago) but wouldn't umbrella insurance fill any gaps that emerged? I have $1M umbrella for ~$9/mo, which is less than comprehensive car insurance would incrementally costs and covers a bunch more (outside of car value, which in my case, is nearly nothing anyway).

Umbrella policies are liability policies - they generally don't cover property damage to your own property.

[lost_in_the_endless_aisle]

I'm kind of curious about other answers as well (since I ditched comprehensive years ago) but wouldn't umbrella insurance fill any gaps that emerged? I have $1M umbrella for ~$9/mo, which is less than comprehensive car insurance would incrementally costs and covers a bunch more (outside of car value, which in my case, is nearly nothing anyway).

Umbrella policies are liability policies - they generally don't cover property damage to your own property.

Yes, that I get--dropping comprehensive means self-insuring for the value of the car. By gaps I meant liability gaps that a car insurance company would (hypothetically based on OP) otherwise not vigorously defend against.

[Paul der Krake]

I think that's BS.

Why would your insurance company fight for you? Their incentive is to wrap things up as soon as you'll let them.

[kc27]

I think that's BS.

Why would your insurance company fight for you? Their incentive is to wrap things up as soon as you'll let them.

Could it be if the inured party policy holder has the option of making a claim on their own insurance? Maybe because the driver who caused the accident has an insurance company that is not providing full remediation to the injured party? So the injured party makes a claim on their insurance which prompts their company to pursue the other driver's insurance company. I fortunately don't have a lot of knowledge of how insurance claims are managed, so this may be an unrealistic scenario.

The few times when I was due compensation due to damage done to my car by someone else, the insurance companies I dealt with were fair and prompt. However, in one case, where the damage to my car was most severe, the body shop I chose performed substandard work. The vehicle showed rust within a year. By that time I had moved and was living nearly 500 miles away, so I really did not have much recourse.

[Eric]

I have carried liability only for the last 15 years.  The only thing that comes to mind is that if you're renting a car on vacation, you can't rely on your personal insurance for coverage anymore.  You either have to do the CC coverage thing (which makes me nervous) or shell out the extra ~$10/day.  Of course the overall savings is more than worth it.

[kc27]

I forgot about auto rentals. I rent so infrequently, your scenario of the overall yearly savings of liability only coverage outweighing the cost of rental agency add-on insurance makes sense for me, too. If I drop the comprehensive and collision coverage from all the vehicles, I would save $858 a year.

[plog]

Liability only here...except when I know I am going to rent a car.  I Call my agent the day before and add comprehensive, call the day after and drop it. 

[therethere]

Liability only here...except when I know I am going to rent a car.  I Call my agent the day before and add comprehensive, call the day after and drop it.

Can you explain a little more about this? Wouldn't this generally be covered by the credit card you're using for the rental?

I guess I have done this before when going on a long vacation. I lowered/modified my coverage the day before and after. The dumb things I'll do to save $20.

[plog]

I hear it varies credit card to credit card about what is covered, if anything.  So rather than read (and misinterpret) the fine print on my credit card, I just make a call to my actual car insurance agent.   

[JLee]

I like having glass coverage, and that requires comprehensive insurance.  Comprehensive / glass adds so little to my policies that it's worth having in the event I lose a windshield, a tree falls on my car, etc. I'd be more likely to drop collision alone, but my two vehicles are worth ~$12k and ~$21k.  At $3-5k I may not.

[kimmarg]

Don't drop comprehensive. That covers random 'acts of god' like deer jumping in front of you. It's MUCH cheaper than the collision. Collision means "you hit something you !@#$!@% we're not paying". Comprehensive is "oh !@#$!@  a deer!"

[Goldy]

We dropped it on one of our vehicles but kept it on our more expensive one (2k vs 9k).  Curious how insurance would treat that in a rental car scenario.

[Ecky]

I've always been under the impression that in the event you make a claim for an "act of God", afterward your premium would go up, so I've always figured it's better to just fix it myself. It makes a lot of sense to me that insurance companies would stack it such that they always win.

[JLee]

We dropped it on one of our vehicles but kept it on our more expensive one (2k vs 9k).  Curious how insurance would treat that in a rental car scenario.

Side note, if you frequently rent cars / travel...consider the Chase Sapphire Reserve credit card.  The hefty annual fee is largely offset by the annual travel credit and they are the primary insurer for rentals. I had a friend with a cracked windshield on a rental car and it cost him nothing, with no hit to his personal insurance policy.

Anyway, back on track!

[Retireatee1]

The calculus will change if you live in a no-fault state (sound like not).

[LaineyAZ]

We dropped it on one of our vehicles but kept it on our more expensive one (2k vs 9k).  Curious how insurance would treat that in a rental car scenario.

Side note, if you frequently rent cars / travel...consider the Chase Sapphire Reserve credit card.  The hefty annual fee is largely offset by the annual travel credit and they are the primary insurer for rentals. I had a friend with a cracked windshield on a rental car and it cost him nothing, with no hit to his personal insurance policy.
….

Reviving this to add a note about a new credit card benefit change that I just received from my bank:  As of February 2021, they are no longer offering the "Auto Rental Collision Damage Waiver" benefit.  For those who rely on that benefit to decline any extra liability insurance offered by the rental car agency, that's a big deal.  Please double-check your credit card provider to see if they are also removing this benefit.

[Laura33]

I'm kind of curious about other answers as well (since I ditched comprehensive years ago) but wouldn't umbrella insurance fill any gaps that emerged? I have $1M umbrella for ~$9/mo, which is less than comprehensive car insurance would incrementally costs and covers a bunch more (outside of car value, which in my case, is nearly nothing anyway).

My insurer requires me to carry a certain minimum on my auto insurance before they will issue an umbrella policy.

Seems to me the primary issue would be if someone else is at fault and you need to pursue them for damages, right?  As long as you have liability, you will have a lawyer if there is any claim you are at fault, so the lack of a lawyer would come in to play only if it is clear you were completely innocent. 

[lutorm]

I think that's BS.

Why would your insurance company fight for you? Their incentive is to wrap things up as soon as you'll let them.

Well, not quite. The issue is if your insurance company's incentives are aligned with yours and how much skin they have in the game.

The way I've heard it argued is this: Suppose you are involved in a major accident with multiple children and old ladies maimed for life. If you have the statutory minimum of BI third party liability coverage, which can be as low as a something like 25k$, then the easiest out for them is to write the other party a check for 25k and let you handle the lawsuit by the other party and their insurer. If your coverage limit is 250k$, though, they're on hook for a substantial payout and it's now in their interest to help you fight the question of who's at fault all the way to court.

The same incentive is at work if you have collision, of course, but unless we're talking a $100k luxury car, it would likely still be easier for them to just write you a check and be done with it than to argue the question of fault with the other party. For sure for the OPs $9k car it's unlikely to matter.

As a general principle, I apply the standard insurance criterion to this decision: Can I absorb the loss in case of an event? If so, it must be on average advantageous to not have insurance. (The possible exception is if you can credibly think that your risk of a loss is actually higher than what the insurance company thinks and they will underprice your coverage. But I'm not sure I'd get into an actuarial contest with an insurance company...)

The conclusion is that the value of a car is insignificant in relation to our assets and forgoing collision is the rational decision. The opposite conclusion applies to bodily injury liability where the potential downside is pretty much unlimited and could easily bankrupt me. So there I have $500k coverage.

[Paul der Krake]

I think that's BS.

Why would your insurance company fight for you? Their incentive is to wrap things up as soon as you'll let them.

Well, not quite. The issue is if your insurance company's incentives are aligned with yours and how much skin they have in the game.

The way I've heard it argued is this: Suppose you are involved in a major accident with multiple children and old ladies maimed for life. If you have the statutory minimum of BI third party liability coverage, which can be as low as a something like 25k$, then the easiest out for them is to write the other party a check for 25k and let you handle the lawsuit by the other party and their insurer. If your coverage limit is 250k$, though, they're on hook for a substantial payout and it's now in their interest to help you fight the question of who's at fault all the way to court.

The same incentive is at work if you have collision, of course, but unless we're talking a $100k luxury car, it would likely still be easier for them to just write you a check and be done with it than to argue the question of fault with the other party. For sure for the OPs $9k car it's unlikely to matter.

As a general principle, I apply the standard insurance criterion to this decision: Can I absorb the loss in case of an event? If so, it must be on average advantageous to not have insurance. (The possible exception is if you can credibly think that your risk of a loss is actually higher than what the insurance company thinks and they will underprice your coverage. But I'm not sure I'd get into an actuarial contest with an insurance company...)

The conclusion is that the value of a car is insignificant in relation to our assets and forgoing collision is the rational decision. The opposite conclusion applies to bodily injury liability where the potential downside is pretty much unlimited and could easily bankrupt me. So there I have $500k coverage.

This is not what I was arguing. I was responding to the claim from OP that

if you have full coverage and get in an accident where it is not your fault, your insurance company will be an advocate for you in dealing with the other driver's insurance company (assuming the other driver does not have the same insurance company as you).

Let's say you think your car is worth 20k. The at fault driver's insurance company says it's worth 18k, and wants to write you a check for that. Your insurance company couldn't care less. It's not the one doing the checkwriting, its only interest is making sure that you get an amount that is close enough to reality that you won't turn around and make a claim to them. It's not going to argue passionately for the extra 2k to make you whole. It's up to you to make the case for the remaining 2k to the other company.

[Sunder]

Have I missed any reason or benefit to keep the full coverage?

There is one that you might not have thought of, and nobody has mentioned yet. Unethical people.

I had one accident where the other party was clearly at fault. In fact, they said so when we exchanged details, but that his insurance company would reach out to mine to take care of it. I mentioned they should reach out to me directly, as I wasn't insured. He went radio silence, called up his insurance company, they said he never lodged a claim or admitted fault. He didn't take any calls, wouldn't respond to any emails.

I had to lawyer up, and the day before the statement of claim said we were going to lodge, he replied he called the insurance company and said he wasn't at fault, that I rolled back into him, he didn't run up the back of me, despite the unlikelihood of that. Even the insurance company, figuring that he was privately retained, played the same games. Requested we get multiple quotes, and finding trivial reasons to reject them, knowing each time they asked for something else, I got billed by the lawyer again, hoping I would figure it's cheaper to pay for my own damage. Whereas with an insurance company lawyer, they are salaried, and will try to reclaim the money, going straight to court if they have to, and the judge will see any poor behaviour.

They didn't know the lawyer was a friend acting pro-bono, or rather for BBQ and a beer. He let them play their game for a while, then said "I think I have enough evidence you're not negotiating in good faith. We'll see you in court X date". We got a settlement check for the cheapest quote that afternoon.

People who know you aren't insured, will try to screw you over. That's something an actuary doesn't calculate into your premiums. It's not worth the hassle to go through that, unless you too have a friend who will do pro-bono work.