September 28, 2013

What questions should be asked when considering dropping full coverage insurance on your vehicle?

2 thoughts on “September 28, 2013”

  1. Macala says:

    I think the biggest question you should ask your self is “Am I letting emotions get the best of me”. I think there are times where I start getting very anxious and think that I need full coverage on EVERYTHING because of that one worse case sinero. Once emotion is out of the equation then a person can think rational. Do not have an insurance policy that is worth tons more than all of your assets. Ask yourself am I insuring the car for more than it is worth? I got a used car–and didn’t pay alot for it. So now I have partial cover on my vehicle and have liability just incase I happened to cause the accident. Because if I were to total my car, I would have enough saved in my emergency account to buy another used car like I have now.

  2. Mike Finley says:

    Well put, Macala. Let’s recap.

    How much is my vehicle actually worth ( or will help you with that)?

    How much do I have in savings to cover the damages in a vehicle accident where I was at fault?

    Do I have a loan on the vehicle (if you do, you will be required to have full coverage by the actual owner; the bank)?

    How much am I paying yearly for full coverage insurance?

    How much would I pay if I only had liability coverage (your insurance company or others can provide you quotes)?

    How much is my deductible and how would the yearly costs change if I raised it?

    Example: Jane has a vehicle that is paid off and worth $2,300. She has a $1,000 deductible and has $2,000 in savings set aside for emergencies. She currently pays $1,200 a year for full coverage. She does her research and identifies that she could drop down to liability coverage only (covers damages to others if you are at fault, but will not cover damages to your vehicle if you total it) and pay $300 per year. That would be a savings of $900.

    This is where Jane has to decide if she is willing to take that added risk. With the $1,000 deductible she would only get reimbursed $1,300 (after she pays the $1,000 deductible) if you totaled the car. In this scenerio it would make sense to drop full coverage.

    The key is to answer the questions and make an informed decision based on your particular situation. Just like Macala stated, take emotions out of it (as best you can) and see it purely based on a financial perspective.

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