Author Topic: Pay off low-interest car loan to be eligible for liability-only insurance?  (Read 1091 times)

Greyweld

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« Last Edit: March 28, 2019, 12:54:03 PM by Greyweld »

grandep

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I am in a similar situation actually. I recently got engaged to a lovely woman who made the unfortunate decision to buy a new car shortly before we met. She now regrets the decision (partially thanks to my annoyingly persistent efforts to convert her to Mustachianism) but we are still stuck with the loan, about $18k. We have decided to make paying off the loan our top priority because we both highly value being debt free. From a purely numbers perspective this may be non-optimal, but the idea of having a car payment for the next 3 years makes me nauseous, so it's a trade-off I am happy to make.

Also, the fiancee has really gotten excited about paying off the last of our debt which has been a great motivator for her own frugality.

Laura Ingalls

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Dig out our your declaration page and it will show how much of your current premium is comp and collision.  It might be a huge difference or a modest one.  Also think about our plan B if your car is totaled. 

I actually donít think your auto loan rates are all that low.  You might be able to refinance at your local credit union for less.

Paul der Krake

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You mentioned how much you owe on the cars, but not what they're worth. Can you absorb losing their value? Losing a $5,000 dollar car is very different from losing a $35,000 car.

PMG

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Call your insurance company and get a quote?

Greyweld

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« Last Edit: March 28, 2019, 12:54:20 PM by Greyweld »

JLee

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I'd be more willing to drop collision than comprehensive. Comprehensive covers damage not caused by you crashing, i.e. nature, theft, vandalism, etc. It's also required for glass coverage, which I carry on everything now (windshields are expensive and the insurance is pretty cheap - I had a windshield replaced a couple of months ago).

Greyweld

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I'd be more willing to drop collision than comprehensive. Comprehensive covers damage not caused by you crashing, i.e. nature, theft, vandalism, etc. It's also required for glass coverage, which I carry on everything now (windshields are expensive and the insurance is pretty cheap - I had a windshield replaced a couple of months ago).

That's really good information. Thank you!

robartsd

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Comprehensive covers damage not caused by crashing, it does not cover damage caused by other drivers causing a crash. Comprehensive + uninsured motorist should cover you for all damage where you are not at fault in most states (California, Colorado, Georgia, Illinois, Louisiana, and Ohio don't allow uninsured motorist to cover damage from hit-and-run collisions). You'll need to ask your insurance company what the premium difference would be if you dropped collision and opted for uninsured motorist instead (you might have an uninsured motorist deductible waiver on your collision insurance, but that's not the same coverage).