Author Topic: Should we keep full insurance coverage on our vehicles?  (Read 2769 times)

lampstache

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Should we keep full insurance coverage on our vehicles?
« on: January 16, 2018, 08:33:29 AM »
We live in MN and my thought process has been due to icy roads and snow it's worthwhile to keep full coverage on the vehicles. Just yesterday on the way in to work I saw a large number of spin outs and fender benders due to the roads. This makes feel better about keeping full coverage, but at the same time realizing we haven't had any issues up to now when it comes to accidents.

Vehicles:
2005 Honda CRV - 170,000 miles
2005 Lexus - 67,000 miles

Currently monthly premium: $134.47
W/O comp and collision: $86.70

Is the $48 difference drastic enough that I should drop the coverage for each vehicle? Also, the lexus carries the bulk of the discount since the CRV has many more miles and is not valued as highly.

Other folks that live in crummy winter climates have thoughts on this?

Finances_With_Purpose

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #1 on: January 16, 2018, 08:46:13 AM »
You know, I generally prefer not to, but in your case it's not so bad.  It would help to know approximately what your vehicles are worth.  But from the stats you gave that seems reasonably cheap.  Also depends upon how they would value your car if you actually do lose one - hopefully they don't undervalue it significantly. 

For us, it works out that over the long term (20 years, say), we come out ahead even if we total a car.  And neither of us have ever had a wreck of our own making.  So I'm not too worried about it. 

If you have a full emergency fund that can handle that type of situation, plus a car fund, then I would normally recommend you forego it unless you have a reason to be worried.  But ice + snow on the road is a reason for concern.  (I have lived up north as well.) 

If you think there's reasonably more risk of a wreck where you are than for what they're charging, then yeah, it may be worth it.  If you think there's a 50% chance you'll crash over the next 10 years, and that beats the price of replacing a car, then sure, go for it.  (I.e., in that case, buy if .5 x the value of the vehicle is more than the premiums over 10 years.)  That's an instance where insurance is worth paying for.  If you think your risk is higher than the typical driver, especially if it's greater than the typical drive where you live, then insurance can be a good buy.

We try not to drive much, so for us (and for MMM-type folks generally) it's not a good buy usually. 

Slee_stack

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #2 on: January 16, 2018, 11:04:17 AM »
My line in the sand is vehicle value of $5000.

Maybe most Mustachians wouldn't have coverage then.

It will depend on how much your personal premium is too.  You are looking at a +54% for the coverage. $600ish for the year. 

What would a typical repair bill run (minus deductible)?   How many 'crashes' or 'incidents' would it take you to break even at $600/year?
 

« Last Edit: January 16, 2018, 11:07:09 AM by Slee_stack »

BigHaus89

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #3 on: January 16, 2018, 11:17:33 AM »
We keep comprehensive on both vehicles. We live in an area that gets a lot of snow and a lot of deer. It's only a matter of time before one of us nails something. It doesn't cost us that much more.

FiftyIsTheNewTwenty

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #4 on: January 16, 2018, 07:27:01 PM »
In light of your road conditions and what you're paying, you're making a good choice to keep insured.

My line in the sand used to be $3-5k as well.  But that was contingent on a reliable supply of good replacements, in a wealthy town with a pool of older but immaculately maintained cars.  No more -- I carry full insurance on a Toyota worth about $4k.  Higher risk here too. 

saveysavesalot

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #5 on: January 17, 2018, 08:30:40 AM »
"Insurance is a tax on people who are bad at math."
-MMM

Insurance companies know what parts of the country are most likely to have increased accidents from ice and deer...and they price this into your premium.

Clean Shaven

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #6 on: January 17, 2018, 08:42:27 AM »
I agree with the over/under at some level of value - $5k, $7k, whatever you're comfortable with writing off and replacing.

"Insurance is a tax on people who are bad at math."
-MMM

That's also a quote from a guy who decided to self-insure his own home - IOW, zero insurance coverage for anything, fire, personal injury, zilch.  IMHO that's idiotic. One lawsuit can wipe him out.

ketchup

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #7 on: January 17, 2018, 09:59:09 AM »
I agree with the over/under at some level of value - $5k, $7k, whatever you're comfortable with writing off and replacing.
This is the key.  A $200,000 lawsuit is probably a storm you wouldn't be able to just shrug off.  Replacing a car for $10k you might.  It depends on your resources.  As you become wealthier, you can "afford" buying less insurance.

Personally, I've never paid for anything more than liability, but I also don't drive cars that cost more than I bring home in a month.

NoraLenderbee

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #8 on: January 17, 2018, 11:06:37 AM »
Look at the book value of the car. That's the *maximum* you could get from insurance. Then calculate how much you're paying for that amount of coverage. For the Honda, it's almost certainly not worth it.

saveysavesalot

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #9 on: January 17, 2018, 01:14:49 PM »
Look at the book value of the car. That's the *maximum* you could get from insurance.

Take the low-end book value (because you know they will) and subtract the deductible from this number, too.  I've had full coverage at various times for various reasons but yeah, do the math and make sure it's worth it.

lampstache

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #10 on: January 17, 2018, 01:53:20 PM »
Thanks everyone for your comments related to my question. When looking at KBB for car value, should I be looking at what a dealer would pay, private party? Thoughts? I'll pull the data and comment again with said KBB values.

Clean Shaven

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #11 on: January 17, 2018, 01:57:29 PM »
Thanks everyone for your comments related to my question. When looking at KBB for car value, should I be looking at what a dealer would pay, private party? Thoughts? I'll pull the data and comment again with said KBB values.

Private party purchase price -- because you are the private party who would be paying that # in order to buy that car as a replacement.

lampstache

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #12 on: January 17, 2018, 02:39:25 PM »
Per KBB, values are:

Honda CRV in fair condition - $3,434 - $500 deductible = $2,934
Lexus in good condition - $7,310 - $500 deductible = $6,810

If something were to occur to either vehicle that rendered it out of commission we would not have sufficient funds to purchase a vehicle without financing. With that said, our credit is excellent and we would get a great rate. In general our finances are in decent shape, but we don't carry a large emergency fund since I'm comfortable carrying a bit more risk due to our stable jobs and other financial goals we're tackling right now.

Of the $48 we would save by dropping the coverage for both vehicles, we would only save about $18 a month if we dropped coverage only on the CRV. The $18 seems like a small price to pay for the mental security it provides, but I can be swayed.

We plan to keep these vehicles until wheels fall off!

Clean Shaven

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #13 on: January 17, 2018, 02:56:13 PM »
Up to you, obv. 

$18 x 12mo = $216/yr for full coverage on the CRV.
$216 is about 6% of the $3434 value of the CRV.

You can look at it like you're paying 6% of the value of that car every year, just in case you need to make a comp or collision claim.  Or you can look at it like you're paying $216 each year for those things.  You could (mentally) set aside that $216 each year in the "buying a replacement car" bucket.

Or you could look at it like "$18/mo isn't that much, and I'd rather have the comp/collision coverage." 

Seems like a fair position either way.

saveysavesalot

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #14 on: January 17, 2018, 03:09:49 PM »
Or you could look at it like "$18/mo isn't that much, and I'd rather have the comp/collision coverage." 

Agreed.  Also...






Wu-Tang forever :)

Clean Shaven

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Re: Should we keep full insurance coverage on our vehicles?
« Reply #15 on: January 18, 2018, 07:32:11 AM »
Or you could look at it like "$18/mo isn't that much, and I'd rather have the comp/collision coverage." 

Agreed.  Also...






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