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.Reply
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.Reply