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

By: JohnP

JohnP — Tue, 24 May 2011 18:45:20 +0000

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.

By: IRVIN GREEN

IRVIN GREEN — Wed, 22 Sep 2010 19:46:04 +0000

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.

By: Nancy

Nancy — Tue, 13 Apr 2010 01:49:19 +0000

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.

By: jim

jim — Wed, 21 Jan 2009 15:48:33 +0000

Has this always been the case? My recollection was that it extended to cars too… thank you for the note, I’ll investigate.

By: deb

deb — Wed, 21 Jan 2009 15:40:36 +0000

Jim – not correct information you’re giving out. Pennsylvania IS a no-fault state – but that ONLY has to do with your med bills. Your own first party insurance pays your own med bills from an auto accident (and after that is maxed out, then your own personal health insurance), no matter who is at fault. Does NOT have anything to do with property damage. Property damage is decided on percentage of liability (who is at fault).

By: Vishnudevananda

Vishnudevananda — Sat, 23 Aug 2008 17:25:44 +0000

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!

By: Rita

Rita — Fri, 27 Jun 2008 12:42:21 +0000

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!

By: Betty Chumchal

Betty Chumchal — Thu, 31 Jan 2008 16:04:16 +0000

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.

By: KingG

KingG — Tue, 31 Oct 2006 20:22:00 +0000

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)

By: Joe

Joe — Sat, 28 Oct 2006 17:21:09 +0000

My bad – I meant Jim (not Sadhu). I’m am new to your site (linked off of FMF) and was reading prior comments.

By: Joe

Joe — Sat, 28 Oct 2006 17:15:24 +0000

I agree with the previous commenter that no matter how safe of a driver you are, stuff happens! Animals run into the road, trees fall, and drivers get distracted. Don’t risk not having comp and collision coverage unless you are financially set up to bear the risk.

That said, I’d offer this rule of thumb to those that don’t have a car loan and can absorb a sizable loss through an established “emergency fund.” If the cost of comp/coll coverage is more than 5-8% of your car’s blue book value, consider dropping the coverages. I prefer the % approach rather than using the vehicle age. Obviously, the percentages should vary based upon where you live and your own driving habits/skills.

Sadhu – when you bought the Acura, comp/coll was 5.7% of the purchase price (prob. the blue book value) and the Corolla comp/coll was 6.25% so I think your decisions were reasonable, though not clear cut. As vehicles age, the decision becomes easier.

By: jim

jim — Thu, 26 Oct 2006 12:05:20 +0000

David – I wasn’t at fault in the accident, the insurer of the other driver paid for the replacement of my car. I bought my Integra for $14k in 2003 and in 2005, when the vehicle was totaled, USAA sent me a check for $14k.

I re-read what I wrote, you didn’t miss anything, I just wasn’t clear that the woman in the Durango was at fault, her insurance recognized that, and I was paid.

By: David

David — Thu, 26 Oct 2006 05:28:11 +0000

Jim – You said it was “worth it” to save $2000 in payments over the course of 2 years. But I don’t understand how it was actually a net savings if you then had to replace the cost of the car.

Assuming the car’s value was $10K by 2 years later, IF you had insurance they would have replaced that $10K minus the $1000 deductible, so a payout of $9000. So you saved $2000 over 2 years but you lost out on the $9000 insurance payout, right?

What am I missing here?

By: Golbguru

Golbguru — Sat, 21 Oct 2006 09:44:24 +0000

“I saw myself as a pretty safe driver, I don’t take risks, I don’t do anything stupid.”
Insurance is not just about you being a safe driver. You may be safe and not-stupid but there are thousands on the road with you who are unsafe and very stupid and make driving dangerous for everyone. Insurance is for the times when you cross paths with someone stupid and dangerous. Plus there are other things that comprehensive insurance covers that are not in your control.

Insurance is for that one bad day when things go wrong (with you or with someone else) and if it costs a few extra bucks to bail you out of that one day then it shouldn’t be much of a bother.

By: MOMM

MOMM — Sat, 21 Oct 2006 02:31:43 +0000

Interesting! I have plans to call my insurance company next month because our policy is up for renewal – and thus review by me.

I’d like to drop some coverage for my DH’s car – it’s a ’98 Taurus with over 125K miles on it. I think it’s worth maybe just a few thousand. Everyone says to keep all the coverages you can but I’m starting to think why bother – if we get a $1k deductible when the can is only worth maybe $3K.