January 28, 2015

When should a person consider dropping full coverage on their vehicle, leaving them with liability only? Why?

3 thoughts on “January 28, 2015”

  1. Brennan Haag says:

    They should only have liability insurance because it is very unlikely that you will cause more damage to your car than what you would have paid for insurance over time. If you invested your money in index funds instead of having full coverage insurance you would have a lot more money by the time you need to buy a new car. Cars depreciate quickly and you will more than likely never save money on full coverage insurance.

  2. Garrett Haag says:

    If you have an older car that does not have a very high book value, you are likely to pay more in premiums in a few years then you would get if you total a car. If you has a $1000 copay and you have a $2000 car, you will only ever get $1000 if you total your car. If you end up paying $250 a year for your coverage, after 4 years you will pay more for your insurance then you would have ever gotten if you totaled your car. You are more likely not to total your car then you are to total it, so you want to play your odds in this situation.

  3. Mike Finley says:

    Garrett covered this point very well. Let’s recap.

    (1) When you own your own car and the value of that car drops below a certain amount (let’s same $5,000), you should consider the option of dropping full coverage insurance.

    (2) With a $1,000 car deductible, the limited amount of insurance you are getting may not be worth it in relation to the yearly premiums you are paying.

    (3) Dropping full coverage insurance will drop your payments substantially as you self insure for the big stuff (liability insurance).

    (4) This decision should be made with great care. When you drop full coverage, you will not be insured by acts of nature (hitting a deer, tree falling on your car, UFO scraping the back bumper, etc..)

    (5) When in doubt, run the numbers and see what option is best for you not only today, but for many years to come. Onward!

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