Liability or Collision

When is the best time to downgrade your car insurance to just liability? I drive a 1997 Toyota Camry with 198,000+ miles. Body has a few rust spots but the engine runs fantastic. Looking to save a little money, but don’t want to make a poor decision.

The cost of your collision insurance goes down as the value of your car depreciates so it’s mostly a matter of what you’re comfortable with.

Goldwing has it right. The best based only on the numbers would say drop all that insurance. On average you are more likely to spend more money on insurance than you would pay out due to an accident. However things like accidents don’t happen “on average”

If you feel that you can financially self insure (accept your loss and be able to pay any thing that you may be financially responsible for)  and you are not legally responsible for and you can handle then don't carry the insurance. 

By its nature, insurance will, on average, cost you more than it will pay out.

Consider this:
It is not necessary to totally drop your collision coverage if you are not comfortable with losing all coverage of that nature.
Instead, you could opt for a very high deductible. In other words, you would be “self-insured” for the first…$1,000…or $2,000…or $3,000 (whatever you specify), and then your collision coverage would kick in once collision damage exceeds the amount of your deductible.

Just something to consider…

Contact your insurer and discuss it with them. They should be happy to discuss your options and help you decide; mine is. If they won’t do it, get another insurer.

If this car is totaled, are you in a position to buy your next car right away?

What would the collision coverage pay if the vehicle were totaled and what does collision cost? If the premium is $1,000 and the pay off is $2,500 would you continue to pay?

Mathematically, when the yearly premium is more than 10% of the maximum benefit (the value of the car if totaled less the deductible).

Should you wreck your Camry, on a good day, the best you could hope to collect is around $2500.00 How much are you paying for the collision coverage?

Drop collision. If you so much as dent a fender, they’ll total it. What’s the point?

In the eyes of an insurance adjuster, your car is pretty much worthless, being 15 years old, nearly 200k miles, and developing rust spots. If you total the car somehow, the adjuster will nail you for those rust spots and you will be lucky to come away with more than a grand. I know a guy who had a 15 year old Chevy truck, 3/4 ton with a freshly installed DMI bumper on it. He got rear-ended while he was stopped by another pickup truck which was going 60 mph. Needless to say, both trucks were totaled and the other driver was at fault. The other guy’s insurance adjuster refused to offer more than $500 for the truck, citing “age, rust spots, and high mileage” as reasons for such a low payout, with the most emphasis on the rust spots and “the paint is oxidizing! The truck’s not worth more than $500!”. He argued with the adjuster for a week or so, particularly about the loss of a $500 bumper and the truck it was attached to before finally accepting the $500 check on the condition that he got to keep the remains of his truck. He pulled the parts he wanted to keep and scrapped the rest for, yes, $500.

I wouldn’t carry collision on a car that’s over 3 years old, unless it was leased or under a lien.

What is your collision costing your per year? If you have an accident the most your insurer will pay is the “book” value of the car. That value is not much on a '97 with 200K miles, ie $1K to 2K. Therefore, after the deductable you might collect $500 to 1,500. If the premium for collision is $100 perhaps keep it. My guess is that it is a lot more than $100 so I’d drop the collision.

Once a car’s value gets below $10K that’s when I consider dropping collision. You have to look at the premium cost for collision vs the potential payout on a claim. I don’t see my insurer dropping the cost of the premium that much as the car ages and the value drops. Of 4 cars on one policy only one has collision, an '04 T’bird that is holding value pretty well and is still above the $10K mark. '03 Civic, '01 Sequoia, and '00 Camry are not covered for collision, but I do have comprehensive on all 4.

Up front, I’ll state that I have a bias against financial institutions and insurance companies. I think as a nation we tend to want to insure ourselves against any loss and that isn’t possible.
I think a person should be insured against financial ruin and that is what liability insurance is for. On smaller amounts, I will be my own insurer. For instance, on my 2011 Sienna, I carry $1000 deductible on my collision. I carry a deductible on my homeowner’s insurance. Over the years, I have saved a great deal of money. Several years ago, we had a bad ice storm. Some large branches of a tree came down and took off the eaves trough on my house. The money I saved by carrying a deductible more than paid for a replacement gutter on the house and an electric chain saw to cut up the fallen branches. With the amount of damage in our area, I would have had to wait a month for an insurance adjuster and an even longer wait for a carpenter and a tree company to clean up the damage.
In the case of a car, collision on an older car just doesn’t pay. In 1970 when I was in graduate school, I dropped the collision coverage on my 1965 Rambler. I decided that if I did have an accident where I had to assume the cost, I could either have the Rambler repaired with used parts so that it would be driveable, or find another car for around town transportation.

Even with health insurance coverage, I found a carrier that had a large deductible. I could insure myself for minor medical expenses, but I was covered for a major expense.

As others have said, you will probably come out ahead dropping collision. You have a 15 year old car. If you have an accident, the insurance company may call it totaled. However, you can shop around, find used body parts and have a body shop make it driveable and safe, particularly if you don’t care if the color of the replacement used parts don’t match the rest of the car.

Wait. Hold the phones. There are reasons to have full coverage on an older vehicle, but it depends on individual circumstances, and what the insurer provides.

On our vehicles, my wife insists on keeping full coverage (she also handles all the money). her '01 Jetta was paid off in '02, and my '04 4Runner was paid off in late '05. Her reasoning is NOT based on vehicle value, rather on the things we get along with that coverage, such as rental cars, towing, glass repair and a few other things, like mental comfort.

For her, the biggest thing on that list is peace of mind, and the difference for both of our vehicles over a year (we only get year based policies) is about $250.

For my wife to have peace of mind while we both drive around this city full of crazy, idiotic drivers, an estimated 20% uninsured, for me, it’s easily worth $250 a year.

For $75 a year I have have ‘comprehensive’ coverage with a $1,000 deductable:

“Comprehensive coverage pays for loss or damage to your vehicle caused by fire, theft, vandalism, hail, windstorm, riot, falling objects, flood, collision with an animal, and other events as stated in your policy contract.”

Each state is different. Some states don’t offer comprehensive…It’s just a different coverage under collision.

Chaissos, I can get everything you listed except the glass coverage by giving AAA $100 a year, and that’s for the ritzy package. And I get discounts on glass replacements too. I view that as a better deal than giving the insurance company anywhere between $800 and $1500 a year depending on location and other factors to insure a car that they’re going to total out.

I learned this lesson the hard way back when I was a freshman in college. An old lady ran my ancient rustbucket off the road by trying to merge into me. It was a snowy day, and I ended up spinning into a snowbank, which knocked the rusty back bumper loose. $1,000 to fix on a $500 deductible policy. Insurance company wanted to total the car and give me something like $700 for it. I told them to forget it, bought a brand new bumper for $200, installed it myself, and dropped comprehensive the next day after chewing out my agent for having sold me the comprehensive plan. If all I’m going to get out of it is less than my annual insurance bill, why the hell would I give them the money? I’ll bank the money, and if I ever get in a wreck I’ll have a bigger payout than I’d get through them.

I never said it works for everyone. I only said it works for my wife’s peace of mind. To me, that’s priceless, and since I, in all likelihood, will be the one doing (or dealing with) any major (or minor) repairs, I can also be the one fighting with the insurance companies, or lawyers as the case may be.

Seems to me everyone dismisses a differing opinion…just because it’s different, or doesn’t suit them. I merely want to point out that people are different, and do things for different reasons.

We also carry AAA, and she just upgraded it (I forget the plan name), so that it also includes towing up to 100 miles (yes, and a bunch of other stuff). Since we regularly drive 2500 or more miles - one way - to take care of family business, she needs to feel that she has that security…waste of money or not, she feels better, and we can afford a couple hundred a year. Hell, we both smoke, so we throw away that every few months, anyway.

I’m not dismissing your opinion - I’m pointing out that you will lose money by carrying comprehensive on a car that the insurance company will total out for anything more expensive than your deductible. You’ll either lose money by never having to file a claim, or by filing a claim and discovering that you now have to buy another car, and you’ve got less than $1,000 from the insurance company to do it with. If you’re looking for a psychological relaxant, that’s fine - sometimes a false sense of security is worth it for that sense of security. But the OP was asking for financially-based insurance advice.