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Insurance, when to drop collision?

My wife and I own a 2000 Honda Civic. It is 12 years old, has 175,000 miles on it. At what point is it advisable to drop collision? I figure the car is worth $2500 tops and we have a $500 deductable. If we would drop the coverage we would save $130 a year. Any recommendations?

There is no magic formula. It just depends on when you are willing to pay the full loss if you wreck it. So in about 7-10 years you will have paid the full value of the car in premiums. Comprehesive is another matter though. Hail, glass damage, hitting an animal, etc. are more likely hazards and can be very expensive. Can’t remember ever collecting on collision but have had some claims on comprehensive. The last one was a raccoon that took out my radiator for $700.

I agree with Bing, but it is a function of how good a driver you are and how dangerous your driving environment is. If you cannot afford to replace the car (high value) if you are at fault in a collision, then carry it.

Most of us can just put $2000 on our credit cards or bank line of credit.

If you asked a risk manager, he would tell you that the chances of having a collison that’s your fault is about one every 10-15 years. So the RISK is 1/10 of $2000 per year, or $200. You are paying $135 per year which is less. But the part you can insure is $2000-$500 deductible, and that’s only $1500, and reducing yearly. So, paying $135 per year to insure $1500 for an accident you may never have is financially foolish.

In my own case, I had a collision that was my fault in 1977 with a 1966 Chevelle Malibu. The car was worth $500 with $100 deductible. I ended up with $400 cash towards another car! In restrospect I should not have carried collision; my previous accident was with a 1948 Dodge in 1958, 19 years earlier. In the last 54 years I have had 2 collisions that I was responsible for, or one per 27 years.

You may be surprised to know that many large corporations do not carry insurance; they are “self insured” because they can handle the risk and are often larger than many insurance companies.

Your question is similar to many we get as to buy “extended warranties” on new or used cars. On a good car it is usually a waste of money. The things that are insured seldom break down in the period covered.

I drop collision after the loan is paid…( but then again I’m a dealer employee and get those discounts on repairs )
A conundrum between a repair savings account and an insurance policy.
How many times have you asked your insurance policy to pay out ?
Rarely ?
Drop collision and just stand the bill IF the time ever comes.

Do you feel lucky? Can you afford the cost if there is an accident (or other covered event) If so don’t buy that insurance.

From a strictly cost, you don’t want to buy it. While some will win and some will loose, on the average, the insurance company (Extended “warranties” are really insurance.) will come out on top.

They get to write the contract and they design the contract to assure, on average, the car owner is going to pay more than the insurance pays out. To think otherwise is foolish.

Well any car can have major expensive repairs.

The profit to the salesman and company is usually over 50%. So for every $1,000 you spend the insurance company has less than $500 to pay for repairs or they will lose money, something insurance companies do not do. Some people will get nothing back and some will get a lot more than they pay.  Most will get far less. In addition you need to keep in mind that the insurer has worded it to eliminate as many expensive things as they can.

Remember that the seller is out to make money and they get to write the rules and set the price.  They are not going to sell them at a loss so one way or another they are going to have you pay more than they will pay out.  

Would you gamble with a car dealer who gets to set all the rules and knows all the odds?   

Your decision has to do with the value of the piece of mind it gives you. If that is worth the cost then buy it. Don't expect it to cover everything however, most are written to keep cost down and exempt what they know will cost them money. 

Good Luck

When my previous car got to the age of 8 years, I increased my collision deductible to $1,500, and that dropped my rate considerably for the remaining couple of years that I owned it. Then, when I replaced it with a 2011 vehicle, I decided to keep the deductible at $1,500.

Why did I keep it at a $1,500 deductible on a brand-new car?
Because I haven’t had an accident in 41 years, so the likelihood of being in an accident is substantially lower for me than for all of those folks who seem to be in collisions every couple of years. If I do get into an accident, I am prepared to pony up the deductible with a credit card, but in the meantime, I will have saved a few thousand $$ over the years on payments to the insurance company.

By contrast, I have a deductible for my “other than collision” insurance (what used to be called “comprehensive”), of only $100. Why do I have the deductible so low on that part of my policy? Because the likelihood of a broken windshield, or vandalism to the car, or some other event that is totally beyond my control is much more likely than a collision.

Give some thought to my plan, but please note that I pay good old US cash for my new cars.
If you finance your cars, you may not have this much flexibility on coverage.

< If you asked a risk manager, he would tell you that the chances of having a collison that’s your fault is about one every 10-15 years.

Curious, do you know what the ratio is if it includes all accidents? There are lots of people driving without insurance. I’d want to factor those in too.

Thank you for all the inputs. Twin Turbo offered a new twist I didn’t think of. I think I will drop the collision coverage. I do have a $0 deductible for comprehensive on all my cars too many deer around here.

Twin Turb; people who drive without insurance are in a category by themselves. They have generally a very high rate of traffic convictions and a high accident rate. I’m excluding some religious sects who do not believe in insurance and feel God will protect them.

I carry “uninsured motorist” coverage, since there is a much stronger possibility of being hit by someone like that than me causing a collison claim. We live close to two native reservations.

My normal “collison” coverage is apart from the “uninsured motorist” section and the normal “comprehensive” coverage. I agree with VDC that third party damage is much more likely to occur, as well as hail damage in my area here. I have two friends who have had extensive hail damage in the last 5 years, and my wife’s car was broken into as well.

Drop it immediately. If you drop every kind of insurance you have on everything and spend your whole life just paying to fix things when they break you’ll be money ahead.

The only exception to this might be medical coverage, depending on your current age and health.

asemaster; I would have third party liability even on a wheelbarrow! That’s because you could be sued for milions of dollars. Hitting a pedestrian or putting someone in the hospital will bankrupt you without insurance.

I buy travel insurance (relatively cheap) because a stay in hospital and other charges in a foreign country may not be covered by my own health insurance. A recent 4 week trip to Europe cost me and my wife combined about $300 in comprehensive insurance. When in Thailand years ago we ran into a distraught girl whose careless brother had taken a motorcycle trip there without any insurance and had crashed. She needed $4000 to pay his hospital bill. I took her to the embassy who arranged for money to be sent over.

If you go to Mexico by car you buy special insurance at the border. irlandes can advise you just how much to carry. A standard US policy does not cover Mexico, but ususallly does cover driving in Canada since the risk is similar to US conditions.

On a 12 year old car with a maximum value of $2500 and a $500 deductible, the OP would be lucky to get $2000. With a yearly premium for the collision of $130 and let’s say a scrap value of the car of $350, deduct $480 from the $2000. We are now down to risking $1580. Also, it doesn’t take much to do $1250 damage to a car ($1250 would probably be the point the insurance company would consider the car a total loss). If the car is safely driveable, or can be made driveable with a few used body parts, it might be better to keep the car rather than give it to the insurance company.
Uninsured motorists, however, might be worth it. I didn’t carry collision on the 1978 Oldsmobile that I drove for many years. However, we had uninsured motorist coverage on all three of our vehicles. I was hit in a parking lot by a woman who was fleeing from the manager of a Hobby Lobby store after she had heisted a dozen candles. She also clipped another car on her way out of the lot. Both of us got her license plate number and the manager of Hobby Lobby called the police. The police insisted that I had to report this to my insurance company. My insurance company found that the person that hit me had no insurance at all. The adjuster for my company said that I would be compensated with my uninsured motirists. The damage was estimated at $250 and the car was worth about $500, so I got a check. Since the dent in the quarter panel didn’t hurt the gas mileage and I would have been embarrassed to take the car to a body shop, I spent the money on something else.

Uninsured motorist coverage is for bodily injury only in most areas. Very few policies cover you car, if any. None of mine ever did.

The point i make is that i would prefer to not worry about collecting from someone else. No matter what, i simply call my insurance and make a claim under my collision coverage and my car gets fixed immediately. Then my ins co has the burden of going after anyone else including deadbeats. There is value in that and i felt it was being overlooked in the discussion.

Have more experience suing deadbeats than i care to have and don’t want the hassle anymore…

You are paying $130 per year to protect 2500 - 500 = $2000 minus the scrap value. You might be surprised how little crash damage now will cost more to repair than the value of your $2500 car. Your car would likely be designated as being “Totaled” by your or an offending party’s insurance company with hardly any crash damage. You also might be surprised how well a car with $2500 worth of damage drives.

Ase, let’s just clarify. In most states you need to carry liability coverage for damage you may do to someone else. Unless you have millions in the bank to pay out, it is irresponsible to drive without liabilty protection. Then you want to protect yourself with the under/uninsured coverage. Then you can protect your property as you please with comp and collision. Its not really a public concern if you wreck your car and have to pay for it yourself, but liability is something else. Think in terms of a school bus, or hitting a young family and need to replace the lifetime earnings plus suffering of a young surgeon. So you can’t just go without. How you want to protect yourself and how much risk you want to take is something else. Large companies who self-insure damage to their cars, also carry reinsurance policies for catastrophic losses. Its just a cost of living or doing business and you don’t ever expect to normally come out ahead.

Housing is another matter. House burns down? I’ve never had a lot of claims but my $16,000 roof is being replaced due to hail. It’ll take a few years before they get that back. My raccoon would have cost me $700 a month ago, and last year had $2000 in hail damage on the car. Its been an unusual streak, but it does happen from time to time. In 40 years, I never had more than $5000 in medical bills, but my wife’s leg last year was $23.000 with a $1500 deduct. Just say’n, its not a game you really want to win, but a few bad years and you’ll be glad you have it. Now the roof is a little over the top since I was going to need one anyway, but I won’t begrudge the premiums.

@Bing–medical coverage is an absolute necessity. My wife had 2 nights in the emergency room with extreme abdominal pain. The first night, the pain subsided and they sent her home only to have the pain reoccur the second night. After an MRI, X-rays and all kinds of other tests, the cause was never really found, but it was assumed to have been food poisoning. Our insurance company was billed for over $10,000.

@Docnick, sure you could be sued for millions of dollars, because you have an insurance company willing to pay out that much. If you haven’t got 3 nickels to rub together, no one is going to bother to sue you for anything–can’t get blood from a turnip.

@Bing, I think medical insurance has become a necessity, but I think the insurance industry in large part created that need. Tell your dentist or doctor you’ll just need to pay cash for services and see how much more reasonable the price becomes. Being responsible for damage you cause to another in an accident? People are that way or they aren’t. Those of us that are responsible are insured or have money in the bank. As for homeowners insurance, looks like you won the gamble on that one.

Aside from medical, I’m certain that if I had all the money back I’ve paid for insurance, service contracts, warranties, and such over the years and just paid for things out of my pocket I’d be money ahead.

I also think that we as a people should have a better understanding that bad things are going to happen to us sometimes and we may never be made whole again after those bad things happen.

Someone mentioned my name in reference to insurance in Mexico. There are two common choices. One is Sanborn’s. I once priced Sanborns, but I was told I could only buy the same coverage I had in the US. I am not going to pay for full coverage in the US, McAllen, for 11 months a year when my car does not enter the US even once. Full coverage in McAllen runs nearly $1000 a year.

The other is Lewis and Lewis, L & L actually sells insurance from a Mexican company, Qualitas. So, claims are done by that Mexican company.

I reduce my US insurance to minimum liability, which runs maybe $250 a year, and when I come back I call by telephone and they send me the insurance statement by e-mail, and bill me for full coverage. When I leave at the end of the month, I go in and sign the reduction.

Full coverage plus travel insurance as part of the policy (included air ambulance if required) runs me around $338 for 12 months. Policies can be for part of Mexico or all of Mexico if you go as far south as I do.

I have $300,000 USD for body injury and property damage. This is an outrageous amount if you hit a Mexican, but I allow for hitting a North American.

Medical payments $5000 per person, total per accident $25000 USD.

$100,000 USD for legal assistance. Uninsured motorist bodily injury up to $20,000 USD.

Collision; includes volcanic eruptions, land slides; cave-ins. $500 USD deductible. I think there is provision for paying for repairs in the US.

And, trip coverage including in some cases paying family member to fly to your side. This was added this year, and they did not charge me more when they added it.

All for $338 for 365 days, ALL of Mexico. If you have a claim they send a representative to where you are. And, in Mexico, if someone actually gets hurt in a wreck, both drivers sit in jail until the insurance company shows up and pays.

Price goes up with value on your car. This $338 is for a 2002 Sienna worth around $5000.

If you visit Mexico for a short visit, a short term policy with Sanborn’s may be a valid choice.

I doubt anyone is especially interested in Mexican insurance, but since my name was mentioned, I thought I would tell what I know. On the other hand, Google might send people here, who knows?

@irlandes; thanks for your detailed analysis of insuring in Mexico. We are planning a car trip there some time in the future; your advice is better and more complete than that in the AAA guide.

Thank You. I had the benefit of having my policy in front of me. You can find it all on the Internet on the page listed. Yes, you can pay online with credit card, but I think Visa, but not Discover. And, you can print the policy from your computer, though they also send you the policy by mail. Since I am in Mexico, I just print it and put it in the car. When my wife goes to the States next week, she will bring me back the official one.