Author Topic: Would you drop car insurance to Liability?  (Read 4694 times)

stlbrah

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Would you drop car insurance to Liability?
« on: October 26, 2016, 02:41:01 PM »
I am wondering if it would make sense to drop my car to Liability-only insurance rather than the full coverage. I looked into it and it goes from about $85 to about $40.

It is a 2008 audi a4 with 104,000 miles. No major mechanical issues, but some minor diy body-work that is less is less than perfect and there is curb rash on the wheels. It is worth about $6663 in fair condition per KBB.

I put about 8750 miles on it this past year, but I anticipate even less this year. I work from home about 90% of the time (this could change if i ever go to a different position), and live a short drive from most other places I go. I anticipate probably more like 6000 miles this year as I took it on some road trips last year, and I have decided to only take rental cars on road trips in the future.  I hear of 2005-2008 a4s lasting anywhere from 120k-160k miles before they become unreliable.

The thought came about recently when I dented my quarter panel (hence the DIY body work I mentioned) and it lead me to a situation where I could have insurance fix it but it would raise the rate to the point that it was not worth it. My thoughts were why pay for it if it is not worth it to make claims with it.

Anyways, looking for some opinions. Thanks!


« Last Edit: October 26, 2016, 02:43:13 PM by stlbrah »

seattlecyclone

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Re: Would you drop car insurance to Liability?
« Reply #1 on: October 26, 2016, 02:43:04 PM »
The odds are generally in your favor when you reduce your insurance. If paying out of pocket to replace your car would not pose a severe financial hardship, this is probably a smart idea.

stlbrah

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Re: Would you drop car insurance to Liability?
« Reply #2 on: October 26, 2016, 02:51:21 PM »
The odds are generally in your favor when you reduce your insurance. If paying out of pocket to replace your car would not pose a severe financial hardship, this is probably a smart idea.

Not so much worried about financial hardship. One thing that I read online is that bodily injury coverage may not be good enough with reliability.

seattlecyclone

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Re: Would you drop car insurance to Liability?
« Reply #3 on: October 26, 2016, 03:12:00 PM »
The odds are generally in your favor when you reduce your insurance. If paying out of pocket to replace your car would not pose a severe financial hardship, this is probably a smart idea.

Not so much worried about financial hardship. One thing that I read online is that bodily injury coverage may not be good enough with reliability.

Bodily injury coverage is generally a separate thing from liability, collision, and comprehensive...these are all separate coverages. If you really want this coverage I would expect you could still pay for it. However you should consider whether it makes sense to pay your auto insurance provider for bodily injury coverage when you're already paying a health insurance provider to treat these injuries if they do occur.

Monkey Uncle

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Re: Would you drop car insurance to Liability?
« Reply #4 on: October 27, 2016, 04:27:13 AM »
The odds are generally in your favor when you reduce your insurance. If paying out of pocket to replace your car would not pose a severe financial hardship, this is probably a smart idea.

Not so much worried about financial hardship. One thing that I read online is that bodily injury coverage may not be good enough with reliability.

Bodily injury coverage is generally a separate thing from liability, collision, and comprehensive...these are all separate coverages. If you really want this coverage I would expect you could still pay for it. However you should consider whether it makes sense to pay your auto insurance provider for bodily injury coverage when you're already paying a health insurance provider to treat these injuries if they do occur.

Bodily injury is part of your liability coverage.  It does not cover injuries to your own body, it covers injuries that you cause to other people's bodies when you have a wreck that is your fault.  In most places in the US, you are required to have bodily injury coverage as part of your mandatory liability coverage.

https://www.libertymutual.com/auto/car-insurance-coverage/bodily-injury-liability

MasterStache

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Re: Would you drop car insurance to Liability?
« Reply #5 on: October 27, 2016, 06:09:40 AM »
The best way to insure is by insuring yourself. Drive a cheap reliable used car (one that you can replace without enduring financial hardship). Drive as little as possible. Drive cautiously and pro-actively. I've lost track of the number of wrecks I have prevented by constantly being aware of my surroundings and anticipating drivers moves.

I have reliability and minimum coverage for everything.

FLBiker

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Re: Would you drop car insurance to Liability?
« Reply #6 on: October 27, 2016, 07:34:52 AM »
We have full coverage on our "expensive" car (a 2009 Corolla) and liability on our 1999 Ford Explorer Sport.  I'd do liability on both, but my wife wasn't comfortable with that.

That said, my mom had a bad car accident last year and her relatively new Ford Explorer was totalled.  They just had liability, which mean that their insurance company didn't help at all in getting the other guy's insurance company to pay for their car, which meant they had to get a lawyer.  It's still not totally resolved.

stlbrah

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Re: Would you drop car insurance to Liability?
« Reply #7 on: October 27, 2016, 08:33:59 AM »
Ya, I wouldn't consider my ~$6700 to be considered a cheap car quite yet, however, saving about $500/year is really significant IMO. I suppose I will have to think about it for a few days but I'll prolly lower it and save the money!

Spork

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Re: Would you drop car insurance to Liability?
« Reply #8 on: October 27, 2016, 08:40:27 AM »
I have not carried full coverage on a car since about 2000.  Full coverage is, IMO, a red flag that says you're driving more car than you can afford*.  My rule of thumb is that you should be driving a car you can afford to pay cash for twice.  You should be able to buy it, wreck it on the way home and buy another one just like it.


*I am sure there are exceptions to this general rule.

FIPurpose

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Re: Would you drop car insurance to Liability?
« Reply #9 on: October 27, 2016, 09:45:32 AM »
Assuming that your wealth is such that you could afford to buy a similar car:

You didn't say what your deductible was but assuming a $500 deductible that puts your maximum benefit at about $6000 (this year).

The $540 you save each year + about $400 in depreciation (reduction in max benefit each year - some assumed reduction in insurance premium) means you'd be even after about 5-6 years. I don't know about you but, I don't have at-fault wrecks every 5-6 years. And the one that I did have was about $2000 worth of damage, not totaled. I doubt your car company is really giving you much of any benefit for driving 6000 miles/year either.

ketchup

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Re: Would you drop car insurance to Liability?
« Reply #10 on: October 27, 2016, 10:02:15 AM »
Insurance is only a good buy if the potential downside you're insuring against is large enough to put you in financial ruin (hence homeowners insurance, health insurance, liability insurance, possibly business insurance) or if you're at more risk than the insurance company thinks you are.  Other than that, as little as you can bear.  The house always wins.

I have not carried full coverage on a car since about 2000.  Full coverage is, IMO, a red flag that says you're driving more car than you can afford*.  My rule of thumb is that you should be driving a car you can afford to pay cash for twice.  You should be able to buy it, wreck it on the way home and buy another one just like it.


*I am sure there are exceptions to this general rule.
I agree with this mindset too.

Jack

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Re: Would you drop car insurance to Liability?
« Reply #11 on: October 27, 2016, 10:09:30 AM »
Full coverage is, IMO, a red flag that says you're driving more car than you can afford*.  My rule of thumb is that you should be driving a car you can afford to pay cash for twice.  You should be able to buy it, wreck it on the way home and buy another one just like it.

I like that logic!

However, I think it might be slightly too strict. I could not replace a car in cash instantaneously simply because I don't keep an emergency fund that large. Instead, I'd juggle N-1 cars for a month and buy the replacement out of cash flow from the next paycheck or so.

seattlecyclone

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Re: Would you drop car insurance to Liability?
« Reply #12 on: October 27, 2016, 12:22:28 PM »
The odds are generally in your favor when you reduce your insurance. If paying out of pocket to replace your car would not pose a severe financial hardship, this is probably a smart idea.

Not so much worried about financial hardship. One thing that I read online is that bodily injury coverage may not be good enough with reliability.

Bodily injury coverage is generally a separate thing from liability, collision, and comprehensive...these are all separate coverages. If you really want this coverage I would expect you could still pay for it. However you should consider whether it makes sense to pay your auto insurance provider for bodily injury coverage when you're already paying a health insurance provider to treat these injuries if they do occur.

Bodily injury is part of your liability coverage.  It does not cover injuries to your own body, it covers injuries that you cause to other people's bodies when you have a wreck that is your fault.  In most places in the US, you are required to have bodily injury coverage as part of your mandatory liability coverage.

https://www.libertymutual.com/auto/car-insurance-coverage/bodily-injury-liability

Sorry, got the terminology wrong. I was thinking of "medical payments" / "personal injury protection" coverage.

nexus

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Re: Would you drop car insurance to Liability?
« Reply #13 on: October 27, 2016, 02:08:44 PM »
When I paid off my vehicle earlier this year the first thing I did was drop my full coverage down to state minimum for California + uninsured motorist. I went from paying $105 per month down to $48, which I now pay in six month chunks of $288. In the process I switched from Geico to Progressive because they offered me a better deal. I expect my six month premium to continue to slowly drop over time as my car gets older and depreciates. The savings is incredibly nice & if something ever happened to my car, I would follow MMM's suggestions and get something used and affordable. It's always a huge plus to be able to reduce your transportation expenses.

Jack

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Re: Would you drop car insurance to Liability?
« Reply #14 on: October 27, 2016, 02:13:49 PM »
When I paid off my vehicle earlier this year the first thing I did was drop my full coverage down to state minimum for California + uninsured motorist.

That is not a good idea. Cutting collision & comprehensive is one thing -- the most it'll ever pay out is the cost of the car. Cutting liability is entirely another -- if you don't have enough, you could be on the hook for hundreds of thousands of dollars.

Spork

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Re: Would you drop car insurance to Liability?
« Reply #15 on: October 27, 2016, 03:53:02 PM »
Full coverage is, IMO, a red flag that says you're driving more car than you can afford*.  My rule of thumb is that you should be driving a car you can afford to pay cash for twice.  You should be able to buy it, wreck it on the way home and buy another one just like it.

I like that logic!

However, I think it might be slightly too strict. I could not replace a car in cash instantaneously simply because I don't keep an emergency fund that large. Instead, I'd juggle N-1 cars for a month and buy the replacement out of cash flow from the next paycheck or so.

Same thing.  If you have to take a taxi home, click on your Vanguard account, wait for some money to appear in checking and then buy it again -- we're on the same page.

Interest Compound

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Re: Would you drop car insurance to Liability?
« Reply #16 on: October 27, 2016, 09:39:49 PM »
For what it's worth, I have a $12,000 car, and only pay Liability. That said, I pay for the most liability they offer, along with a few million in Umbrella insurance :)

Here are some numbers for you. Don't forget the car depreciates. In 5 years that car might only be worth $2000.

The vast majority of accidents don't total the car. In 2015, the average collision claim was $3,350; the average comprehensive claim was $1,671:


Source: http://www.rmiia.org/auto/traffic_safety/Cost_of_crashes.asp

Looking at your post, it seems you might drive that car for another 10 years. Here's what it looks like if you invest the extra $40 a month instead:




After a few years of paying the extra premiums, you might've paid more to insure the car, than it's actually worth.

Since the expensive cars inflate the average, I'd guess the typical median collision claim is closer to $2,000. Paying $480 a year (and a $500 deductible) to insure against this risk, doesn't make financial sense. The math simply doesn't work out in your favor...and the insurance company knows this. That's why they offered to insure the vehicle at that price. They need to be profitable.
« Last Edit: October 27, 2016, 09:42:23 PM by Interest Compound »

MoonLiteNite

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Re: Would you drop car insurance to Liability?
« Reply #17 on: October 28, 2016, 05:05:26 AM »
I just did mine a few months ago, went from like 80/mo to 40/mo.
Kinda torn on it for myself, car isa 2010 fit sport manual, 80k miles, no issues.

i almost want to put it back on because of the times it has saved me from crappy scam ins companies.
But i figured, if i do get hit, and can't get it repaired ever, i will just start using full trash cars.



Spork

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Re: Would you drop car insurance to Liability?
« Reply #18 on: October 28, 2016, 07:06:15 AM »
I just did mine a few months ago, went from like 80/mo to 40/mo.
Kinda torn on it for myself, car isa 2010 fit sport manual, 80k miles, no issues.

i almost want to put it back on because of the times it has saved me from crappy scam ins companies.
But i figured, if i do get hit, and can't get it repaired ever, i will just start using full trash cars.

FWIW: It doesn't always save you.  In about 1988 I had a 1975 Triumph with full insurance that was totaled.  They gave me less than half what it was worth.  I spent months protesting.  I provided comps for sale.  I pointed the adjuster to a couple of experts on that particular car.  I pointed the adjuster to another insurance company that had paid on a friend's Triumph when he wrecked it. None of that helped.

Back then I was under 25 and male.  My insurance costs for full coverage were through the damn roof. 

stlbrah

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Re: Would you drop car insurance to Liability?
« Reply #19 on: October 28, 2016, 12:46:23 PM »
I appreciate the replies. I learned a lot about this topic