Author Topic: Help convince me to reduce insurance  (Read 1576 times)

Dalmuti

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Help convince me to reduce insurance
« on: January 30, 2015, 02:57:04 PM »
MMM's post on insurance makes a lot of sense to me.  The insurance companies are making money, so I should only carry it when either 1) I'm required to, 2) I can't afford the consequences, or 3) I am riskier than the insurance company thinks. 

http://www.mrmoneymustache.com/2011/06/02/insurance-a-tax-on-people-who-are-bad-at-math/

This led me to think I ought to trade out my full coverage auto insurance for a cheaper liability only option since I have enough of a stash that I could afford to replace my cars without major disruption.  But when I start comparing prices between a full coverage policy and the minimum required by law, I start to wonder how the liability policies can be a better deal.  Our two cars are 5ish years old and paid off and they are valued according to KBB at 11k and 13k.  But when I price the various options, Geico quotes me $248 per 6 months of state required minimum coverage and $442 per 6 months for coverage similar to what I have typically had ($500 deductible collision/comprehensive, larger liability).  Prices vary from company to company but the difference between the two policy types is fairly similar.  Ok, so I can save $388 per year (($442-$248)*2)  by just getting the minimum, and I'm all about some extra savings. 

But when I think about the math, the average accident that totals a car will cost me 12k.  In my mind that means I would have to skip full coverage for ~30 years to save enough money to pay for a totaled car or looked at a different way, the insurance is betting that for a given year there is less than a 1 in 30 chance of either car being totaled in an accident where we are liable (or 1 in 60 for each car individually).  We are pretty safe drivers, but that seems like a pretty low probability especially since the insurance also covers the more minor accidents that might come in addition to the 30 year totaling.  Maybe I overestimate the probability of a wreck that results in a total loss since I've typically driven cheaper cars (my first car was totaled with no damage to anything but the bumper) or maybe there is something else I'm missing.  Any feedback would be appreciated.  Of course, I know the true mustachian solution might be to sell one car and trade the other in for a $2500 car where liability is obviously the right policy, but I'm working my way up to that.  Any thoughts would be appreciated.

RangerOne

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Re: Help convince me to reduce insurance
« Reply #1 on: January 30, 2015, 05:03:53 PM »

Another option you could keep the full coverage and try to bump up your deductible to $1k or $2k instead of the more typical $500 and see if you get a better rate. Maybe you don't want to risk spending $10k to replace your car, but you could probably handle a higher deductible if all you are worried about is worst case.

BlueBeard

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Re: Help convince me to reduce insurance
« Reply #2 on: June 15, 2015, 12:48:43 PM »
I am in the same boat.  Our vehicle is worth 12k and already set for pleasure use.   I can save $245 a year removing comp and collision on the vehicle driven 1-2 times per week.  I have been in once accident years ago and it was rather expensive.

OP, what did you decide?