When to drop full coverage on auto insurance?
What strategies do people have for auto insurance? I’m not sure when to stop paying full coverage (comp + collision). I imagine it would involve starting a category for a new car? Suggestions appreciated.
When you have enough set aside that you could replace your vehicle with cash (maybe a lesser car, but one that would suffice), drop the full coverage. Start throwing that savings into your transportation categories so, yes, you have more available for your next purchase. If you're not quite ready to drop full coverage, consider upping your deductible instead, to $1000 or $2500. That could save you a ton, provided you would be able to meet it should something require you to do so.
My financial advisor's rule of thumb was when your premium for comp and collision is more than 10% of the value of the car. Even if you can't afford to buy a new, running car outright, at that point it makes more sense to finance an inexpensive used car if your car is suddenly destroyed (which is actually what happened to me.)
Put the savings from the premium in your "new car" category.
I just got off the phone with our ins. Agent and dropping full coverage on our 2003 mini van would only save us $33/mo.
I was expecting a larger savings, it seems like it might not be worth the savings, we are in MI and have state wide "no fault" insurance. I'm not sure if that makes it a lot more expensive or not.
Am I missing something? I know, ride a bike, it would certainly save money, we have 3 young children still in car seats, and live out in the country, so a vehicle is pretty needed to get most places, my DH does ride his bike to work about 3/4 of the year.
my financial advisor's rule of thumb was when your premium for comp and collision is more than 10% of the value of the car
I assume this number is an annual amount. So in the post above $33/Mo would be $396, so if the car is worth more than 4K then keep the insurance. Sounds like a good rule of thumb.
Our vehicles have held onto their value fairly well per KBB, so I don't see the point in dropping coverage. Our 2006 CR-V still is worth over $4000, and we're paying $120 a year for comp and collision on it. The replacement car is fully funded... and we've been funding the replacement's replacement for 9 months, but if the 2006 were to get totaled, I'd rather have the $3500 (after deductible assuming fault) than nothing.