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Why I Don’t Carry Collision and Comprehensive Auto Insurance Coverage

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CK asked me, in my post about requesting auto and homeowner’s insurance quotes, what my logic was in not getting collision and comprehensive coverage and so I’ll share it with you all. First though, I want to admit that it’s a risky decision and that it’s not for everyone. I have a relatively new car that still has a higher percentage of value, compared to its saleable value, and so it’s very risky. Let me explain why I did it, plus a little background.

I purchased my first car, a 2000 Acura Integra, about three years ago for approximately $14,000 on eBay. In quoting car insurance I found that it would’ve cost me approximately ~$1500 per year to insure the vehicle (I was 23, single, and in a sporty car) with comprehensive and collision coverage ($1000 deductibles). By removing collision and comprehensive, that price fell to a mere $700 a year. (This is all based on memory, I don’t have my records anymore), a difference of $800 a year. Two years later the car was totaled when a woman in a Dodge Durango ran a red light and t-boned my car. So, if you were to reset the clock, I saved approximately $2,000 in insurance payments. So, in this case, the risk was “worth it” but that may not always be the case.

So why did I self insure instead of getting comprehensive and collision insurance?

  • By not living in the city, I felt the chances of a theft were smaller. Comprehensive insurance is what would be used in the event your car is stolen. It’s also what would be used in the event someone broke into your car, though your renters or homeowners would protect your possessions in the vehicle.
  • A deductible of $1,000 is pretty high, you pretty much don’t claim anything unless it’s catastrophic, which is the purpose of most insurance anyway. So if I had $1,000 worth of damage to the car, I would still basically have no coverage.
  • I saw myself as a pretty safe driver, I don’t take risks, I don’t do anything stupid. Stupid young drivers are the reason why you get shafted on rates if you’re a guy and under 25 years old.

My current vehicle, a yellow Toyota Celica, is insured the same way. I purchased it with the insurance money from my last car, courtesy of USAA (of which I can say only good things about), and I’m saving a little more (about a thousand a year) to self-insure. Saving a thousand dollars a year, especially when the protection wouldn’t even kick in until damage exceeds $1000 (and even then only the excess is covered), is a significant cost savings and I’m willing to take that on a car that I bought for about $16,000.

Any thoughts? CK, you better answer and give me a stern talking to for self-insuring. :)

{ 36 comments, please add your thoughts now! }

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36 Responses to “Why I Don’t Carry Collision and Comprehensive Auto Insurance Coverage”

  1. KingG says:

    Agree with Joe, his % seems reasonable. However you need to add risk into those percetages. If you are M under 25 you may want to double the %. Since you are at a higher risk.

    Our country definately overinsures.

    If you can afford to replace your car it is almost never a good idea to pay for collision and comprehensive (unless you plan to comit fraud and wreck your car purposefully). The cases where it is a good idea is where the insurance company has somehow mis-rated you.

    Obviously if you are leasing/financing you should have c&c, the assumption being you leased because you couldn’t afford to buy, and by definition need the insurance (the exception here is if you recieved some special financing terms, which should really be a reduction in the price, the problem is the financing company will probably make you get c&c)

  2. Betty Chumchal says:

    I was recently in a car accident. My car is a 1993 Ford Taurus LX. I was only covered for liability and although I have not received a ticket yet I was told that I was at fault. Will my insurance pay me anything at all for my car since I did not have full coverage? If they find it totalled will I be paid a salvage value and be able to keep the car and sell for parts.

  3. Rita says:

    I think the good old hit and run isn’t mentioned here! There would be no other insurance to fall back on. Then you’re out all together!

  4. Vishnudevananda says:

    Hi, Joe,

    Could you explain your guideline of 5-8% of bluebook value as a reasonable price to pay for comprehensive/collision insurance? What have you based that figure on?

    Thanks!

  5. Nancy says:

    I rent cars frequently, although my own car is so old that I don’t carry C&C. I realized without C&C on my own car I wouldn’t have it on a car I rented, either, and was faced with paying the rental company’s usurious insurance fees. Until I found out one of my credit cards offers collision insurance for free if you charge the full amount of the car rental to the card. Now I only have to worry about comprehensive and since I have not had a comprehensive claim in 38 years of driving I hope I am safe.

  6. IRVIN GREEN says:

    I AM 72YEARS OLD. DURING THE PAST 50YEARS I HAVE PURCHASED ONLY NEW CARS. I HAVE NEVER PURCHASED COMPREHENSIVE OR COLLISION INSURANCE, ONLY LIABILITY. I PAID CASH FOR THE CARS RATHER THAN HAVING THEM FINANCED BY A BANK. I UNDERSTAND THAT MOST PEOPLE WOULD NOT BE ABLE TO PAY CASH UP FRONT. I ASSUMED THE RISK THAT THE CARS COULD BE HIT BY A METEORITE THE MOMENT I DROVE THEM OFF THE LOT.
    I HAVE KEPT A MATHEMATICAL TRACK OF WHAT I WOULD HAVE PAID FOR INSURANCE SINCE I PURCHASED MY FIRST NEW CAR, A FORD MUSTANG BACK IN THE 60′S, TO MY LAST NEW PURCHASES, A 2001 BUICK CENTURY AND A 2001 BUICK PARK AVENUE.
    I WOULD HAVE SPENT OVER $150,000 IF HAD PAID FOR INSURANCE. FORTUNATELY, I HAD ONLY TWO FENDER-BENDERS, BUT IF I HAD TOTALLED A CAR, I COULD HAVE PURCHASED SEVERAL NEW CARS FOR THE AMOUNT OF INSURANCE I WOULD HAVE PAID.
    MANY PEOPLE VIEW THEIR FUTURE AS HAVING A HIGH PROBABILITY OF BEING CATASTROPHE WAITING TO HAPPEN AND WOULD NEVER DO WHAT I DID.

  7. JohnP says:

    I was looking for insight here on my decision not to insure my home. I know that’s potentially a bad risk but the discussion on C&C on older cars is interestingly similar. I also choose not to insure my cars after they are paid for. Some people always have a car note since they buy a new car every few years but I believe that is a waste of money so I buy a car with an exceptional reliability history (Toyota or Honda) and I put several hundered thousand miles on it before getting another car. This gives people like me an excellent opportunity to save money on collision insurance as well as new car depreciation and loan interest. So far, I had one incident (struck a deer) when I could have used insurance to cover damage. I replaced a hedlight assembly and didn’t repair the hood damage. I am also of the opinion a select few people can also justify not insuring their home. Insurance companies make money because most people’s claims are far less than insurance payments. As in car insurance, the premium is cheaper if you carry a high deductible and you have to consider the chance your insurance premium will increase if you make a claim. Most home insurance is based on a “greed” policy and covers the cost to rebuild your house if it’s totaled. I paid $73K for my house and there are lots of comparable used homes on the market that I could buy for about that much if my home were totaled so I see no sense (other than greed) in paying a premium calculated to replace my home at a cost of about $140K. Once my home was paid for, I dropped home insurance and I find I can still sleep at night. I’m single and have no family members that would be homeless if my home were severely damaged or totaled. I have made my insurance decisions on the basis of my own personal circumstances and I have chosen a lifestyle that makes me a better risk than that national average the insurance companies use. This is another reason why it’s super important to use common sense in your financial life. The more indebted you are, the fewer options you have to save. You will find the deeper in debt you are, the more your debt will cost you in terms of interest rates, overdraft fees, and the sheer number of items you may find yourself paying interest on that you should be paying for with cash.

  8. June6bug says:

    I bought a 2002 Toyota Solara Camry that I paid $6,937.88 in CASH. I purchased the auto in 2010. The body of the car was never damaged when I purchased it. I have has three accidents since then. My front bumper has been replaced with a new one so far. The new bumper just got damaged again, and I just got side swiped on my drivers side rear panel when It was parked while I was shopping. Two of the incidents the insurance company deemed my fault. My deductible was $100 for each accident. The first accident my deductible was $250. I lowered the deductible to $100 because I had a hard time paying that. Now I have to come up with $100 each to fix the two new damages. I am on social security and I cannot afford to raise my deductible to $1000. I would never be able to come up with that! I cannot afford to self insure on my income. I am stuck paying lower deductibles or I could not fix the damage. What do people like us do? I would love not to pay for collision and comprehensive. It’s just too big a risk for me. At one time, I had a car that I paid $2,600 for and I decided it was too old to pay for C/C. It got hit and I never fixed the damage…no money. My Toyota is a 2002 and is worth about $4000 by Kelly Blue book. I pay Geico $455.70 every 6 months for full coverage. My premium is $76.96 a month. Any suggestions? Should I take the risk and drop C/C or just raise my deductible to the highest amount? So far, the damage has only cost me $250 for the first incident and then it will be another $200 deductible to fix the rest of the damage when I can come up with the money.

  9. June6bug says:

    Con’t…In addition, I changed my deductible once when I lived in Florida to $500 to save money through the year. The very next month after I changed it my car was a hit and run. The damage was over a $1000 to fix it. I had to come up with $500 to get the body work done. I immediately changed the deductible back to $250 after that. The only people that can have high deductibles are the wealthy or have an emergency fund. It doesn’t matter how good a driver you are there is someone who is not. They drive without insurance and YOU pay the price! They don’t care if they hit you because they don’t care about their own cars. They know you will have to pay to get it fixed. You can’t live in a bubble thinking you won’t get hit. I have had it happen to me over and over again. Just sayin…think twice before you cancel your C/C or raise your deductible! It’s a CATCH 22! I have tried $500, $250, & $100 deductible and was hit every time. I am out of options trying to beat the insurance companies! I guess my only hope is to become a millionaire!


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