Car Insurance question

[twinnyme]

Next July, both DH's and my cars will be paid off. I know that we HAD to take a specific type of insurance when we bought our cars because we were paying for that over time. But are there ways to save money on insurance once the cars are paid off? I vaguely recall hearing that you could drop one portion of the insurance once the car's paid off. Is that true? Does anyone know or have any stories to share of whether we should or should NOT drop any part of our insurance once our cars are paid off? TIA!

[amorey]

This might vary from state to state, but I can tell you what I did. I bought a used car, and while there was a lean on the title, I was required to have comprehensive and collision on it. Once I paid the loan off, I dropped the collision coverage. Because the car is used and not worth much, if the car sustained even minor damage it would probably be totaled. I did keep the comprehensive coverage, because we live in a “transitional” neighborhood I wanted coverage in case the car is stolen or vandalized.

If your cars are worth more than a few thousand dollars, I would keep the collision coverage.

[Hello Kitty]

When you have a vehicle with a loan, the loan company requires you to cover collision and comprehensive insurance - that means, if you total your car, the value of the car itself is reimbursed. If someone steals your car, the value is reimbured. This way the loan company isn't out whatever the balance of your loan is.

When you don't have the loan anymore, you may wish to have liability insurance only. So if your car is totaled, it will not be replaced and you will not get reimbursement for it. FTR, collision & comprehensive represent about half my insurance premium.

You want to consider what you'll be out if you lose your car. If it is good, maintainable condition, it might not be a bad idea to keep the insurance. However, if you'd be comfortable assuming a new car payment or don't need/want the car, then you could go down to liability.

[SingleWhiteFemale]

You can drop the collision, but not the liability. I honestly wouldn't recommend that--I actually had a friend who did that (teenage male, sportscar--high premiums), and the next week someone broke in, took the brand-new radio and rims/tires. The damage done wasn't covered because what he dropped from his insurance the week earlier covered that type of damage. Same moron friend caused an accident by coming out of a sidestreet and making a left turn, and was struck by an oncoming car in the drivers side. Completely his fault, and he ended up paying out of pocket the $400 for the other guy to have his bumper replaced (I know he didn't want to contact his insurance for fear of rates going up). His car still isn't fixed, as he can't afford to have it done. The back left door is banged up, and will not open.

One good way to lower your premium is to raise your deductible. Mine was $200, but looking to lower the premiums, it was raised to $500. It saved quite a bit of money. But, if I was in an accident where I was at fault or had to go through my insurance for a claim, we could pay the $500. I'd make sure to have spare money in the bank that would cover the higher deductible if anything were to happen.

Do you have windshield coverage? That may be something to drop, depending on where you live. I've had to replace 2 windshields in under a year due to flying debri, rocks from dump trucks that I couldn't get around on the Beltway, and once to repair the chips caused by other rocks from said dump trucks. Each windshield runs $450 to fix, and we have a $100 deductible. If you don't live in the area where you have lots of flying debri and haven't had to fix your windshield, this coverage may be something you can live without.

[twinnyme]

Wow, fast responses! Thanks, everyone. I think our safest bet is to keep the total coverage then, because my car is in pretty good shape and I hope to hold onto it for at least another 5-7 years. We'll see about my husband's. But the cost really isn't that much overall and I'd rather be safe than sorry, I think. I did have to use the insurance once (though after going to a hearing the surplus was waived because the accident was deemed not my fault; it was a single-car accident in a snowstorm).

Anyway, I appreciate the info. We still have a while to decide :) but most likely we'll keep it!

[thedoorchick]

Several months ago I was considering dropping the collision coverage on my car to save money.

Not one week later we were in an accident (our fault). Needless to say I'm glad I didn't get around to cancelling the insurance!

[Kristen78]

Some of the things I read seem off here.

You might want to consider dropping the collision. Sometimes you can pay hundreds of dollars a year just for collision insurance. Collision protects your car if you are in an accident. But if the accident is really bad they might not even pay to fix your car. Instead they would pay you the value of your car. Which could be $2000 or so. So in that case you might have been spending $700 a year for the past 4 years for collision and all you got out of it was $2000. So is that worth it? Probably not.

My DH drives a 97' Chevy Blazer. We don't have collision on it because it would probably cost $500 a year and the truck is only worth about $3000. It just doesn't make financial sense.

From what I understand collision is for your car only. As long as you have liability insurance they will still cover the damage you do to another driver's car. Comprehensive is for stuff like theft, if you car caught on fire, vandalism, etc....

[ManteoChik]

Your insurance should go down once your car is paid off and has a few years to it. The requirements probably vary from state to state, but if I were you I'd keep your Full Coverage Insurance. Chances are you would be able to just have Liability Insurance, however that would only cover someone if you were to hit them. It wouldn't cover your car if you hit someone.

[Kristen78]

Yeah, but if you have a car thats only worth say $1500, its not worth it to be paying $500 a year to have collision insurance on it. If you got in an accident and the damage was more than the car is worth, they would consider it totalled and you would only get $1500 and usually that wont buy you a car of the same caliber as the one you had. So if your old car was a 92 Toyota Camry for example and was in excellent shape and you always took care of it and serviced it correctly etc, you probably wont be able to buy a car with the same history for $1500. And if you were paying the $500 for collision for 4 years before you had the accident, then you ended up paying $2000 in insurance but only got back $1500. And you could have been saving the $2000 and earning interest on it. I'm just trying to say that there are some instances where its not worth it to pay for collision insurance.

[KarenS]

There are multiple parts to any automobile insurance coverage.

Liability - this is required by law in most states. The amounts vary from state to state. Liability covers damage to another vehicle and injury to the other person if you are involved in an accident and are found to be at fault. Liability does NOT cover you or your car.

Comprehensive - this covers damage to your vehicle caused by something *other* than an accident. Hail damage. Flood damage. Theft. Anything of that nature is covered by comprehensive.

Collision - this covers damage to your vehicle caused by a collision or other traffic related accident when you are found to be at fault. Most policies lump comprehensive and collision together and you can't get one without the other.

Uninsured/Underinsured Motorist - this covers damage and injury to you and your vehicle if you are involved in an accident with someone who does not have insurance or doesn't have enough insurance and the accident is his or her fault.

Those are the *main* parts of most insurance policies.

There are other smaller things that can be added: PIP is personal injury payment which will cover you if case of personal injury. You can drop this if you have a good health insurance policy. Towing insurance - pretty self explanatory and you can probably drop this, especially if you belong to any kind of auto or travel service or have a credit card (like Amex) that covers towing in case of an emergency. Rental car insurance - this covers the cost of a rental car (usually up to a fixed amount per day) if there is any damage to your car for any reason that renders it undriveable - it will pay for a rental car while your car is in the shop.

As I said above, in most states Liability is *required*. You cannot not drive a car and not carry liability. It's always a good idea to carry uninsured/underinsured coverage in case you're in an accident with someone who doesn't carry liability.

Comp and collision is really a judgement call. It's also where the primary cost of your insurance comes from, especially if you drive a car with a higher value. The amount of your deductable also influences how much you pay for comp and collision. For example, if you only have a $100 deductible, you'll pay more than if you have a $500 or a $1000 deductible. What that means is if your car is damaged, you're responsible for the deductible amount and the insurance will pay the rest. When you're young, just starting out, or a student, it makes sense to have a much lower deductible because you probably don't have a lot of disposable income and coming up with the first $1000 of your car repairs might be hard if not impossible. OTOH, if you're making more, have a bit of savings, etc., it makes sense to have a higher deductible because you can afford to pay for more out of pocket and it lowers your annual insurance.

Like someone else said, you have to consider the value of your car and the amount you will pay each period, as well as the amount of deductible, when you decide whether or not to keep this insurance. If your total cost of the insurance is (for example) $1000 a year and your car is worth $2000, then it might not be worth it to pay for comp and colllision. OTOH, if your car is worth $8000 and you're paying $1000 a year, it's probably worth it.

I hope that helped some. I used ot work in an insurance agency years ago. It's pretty complex at first, but as you start to understand it, insurance really makes a weird sort of sense! :)

Karen

[SingleWhiteFemale]

Uninsured/Underinsured Motorist - this covers damage and injury to you and your vehicle if you are involved in an accident with someone who does not have insurance or doesn't have enough insurance and the accident is his or her fault.

Those are the *main* parts of most insurance policies.

There are other smaller things that can be added: PIP is personal injury payment which will cover you if case of personal injury. You can drop this if you have a good health insurance policy. Towing insurance - pretty self explanatory and you can probably drop this, especially if you belong to any kind of auto or travel service or have a credit card (like Amex) that covers towing in case of an emergency. Some states, you cannot opt out of PIP. Period. I have an amazing health insurance, but a small amount every month of my car insurance premiums pay into the state fund. If you're automatically paying into it, why would a person want to opt out of recieving the benefits?

Uninsured motorist, in MD, isn't something you can "opt out of" either. The cost is built into your car insurance. I'm not sure if you have the coverage if you have liability only, but this isn't something you can unbundle with your collision. If your insurance premiums include this protection and you're paying into it, wouldn't you want to dip into it if needbe?

Towing. If I'm in an accident or emergency, I can call my insurance company to have me towed. Period. And I don't have "towing coverage."

[KarenS]

Some states, you cannot opt out of PIP. [...]
Uninsured motorist, in MD, isn't something you can "opt out of" either. True, in some states (and I don't know which ones) you cannot opt out of either. And in some states, you're just automatically covered for these in the cost of your overall liability coverage - especially if it's required by law.

Towing. If I'm in an accident or emergency, I can call my insurance company to have me towed. Period. And I don't have "towing coverage." Well, if your insurance pays for your car to be towed, then you do have towing coverage. It may not be broken out individually like that. Your insurance company may bundle it in with something else. But it is covered. :) My insurance company (Progressive) and the one I used to work for (State Farm in Texas) broke towing out separately and you could choose it or not.

I'm not sure what all the "periods" are about. I'm sorry if I've offended you somehow in my description of what most standard insurance parts are. I tried to be as generic as possible based on my experiences, but obviously each state has it's own specific requirements and each insurance company bundles their coverages in a little different way.

Karen