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.

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  • 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.

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      • Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
      • 1 yr ago
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      palee agree! I'd add look for a middle ground. A couple years ago I leaned my insurance company has a middle ground between full coverage and limited. It is much cheaper than full coverage. It will not cover damage I cause to my car. However, if a deer hits my car, or a tree falls on it, things like that, then the car will be repaired or replaced. 

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  • 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. 

    Like 4
      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 1 yr ago
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      WordTenor 

      Thanks. That's a handy rule of thumb to make note of for future reference, as I'm pretty sure that I'm closing in on that number, 10% of my vehicle replacement valuation being equal to the difference in premiums between comprehensive and collision.

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  • 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.

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      • Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
      • 1 mth ago
      • Reported - view

      danielpaul In my opinion, the no fault rules make insurance more expensive. I went to college in a no fault state. My vehicle had an emergency, I pulled off to the shoulder, put on my flashers, came to a complete stop, and was about to get out to check the engine, when I was struck from the rear by someone driving in the shoulder! However, as a no fault state, my insurance has to pay to fix my car and his insurance to fix his car. My rates went up and it wasn't my fault! 

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    • danielpaul Michigan changed the rules effective 7/1. You can choose to have lower PIP coverage https://www.michigan.gov/difs/0,5269,7-303-12902_93639---,00.html

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  • WordTenor said:
    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. 

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  • 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.

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    • nolesrule I thought 120/year for comp and collision sounded a little low but I just checked my 2006 4Runner an I am paying 127/yr which is less than I thought earlier.

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