My car is $4-5K (Blue Book) ---> Liability Insurance only?

Old topic and I am very familiar with this money-saving tip.

As my car(s) get older and reach a value below about $4K, most people drop Full Insurance Coverage and go with Liability Coverage only.

This will save me $300 a year in insurance premium.

Just curious what is everyone doing?

I've heard this before, but never kept a vehicle long enough to reach a point where I seriously considered it.

I guess you're essentially self insuring for collision coverage?

The contrary argument might be that you would have to go maybe another 6 years or so of "saving" a portion of your premium until you had enough to cover "replacement cost", but I guess you'd probably look at a different model at some point.

I guess to answer the original question, no, I'm not doing it. Not sure what my KBB value is, but I have a 2002 530 Sport, so hopefully a bit more than $4K. I am curious to hear others reasoning on this.

Good discussion. Currently running liability only on my 540 as I can 'afford' to walk away from it if I damage it.

The 528 on the other hand is about $7G to replace with similar here in Calgary. It carries full comp.

I have comprehensive coverage on my car. I believe my insurance would double if I actually made a claim on it though, so I'm debating dropping it myself. I have some stuff that's comprehensive that I want them to fix, so I'll find out soon enough how it'll affect my insurance.

It depends on how much you need the car, and whether you could afford to replace it yourself, out-of-pocket if necessary. All collision insurance is basically hedging your bet. You're paying a premium to avoid having to come up with a big lump of cash on short notice. So if you have the money on hand to buy replacement transportation, or you can accumulate the money quickly enough to avoid throwing a monkey wrench into your daily life, it makes sense to bank the $300/year instead. I have only liability coverage on my car, but as I've gotten more attached to it (I've had it for 3 months), I've started to think about adding collision coverage.





Edit: corrected "$300/month" to $300/year

Mine is a 97 and I have over 230k miles on it. So the insurance's book value that they would pay is close to nothing.

I dropped collision coverage on it a year ago. But I carry lots of personal liability.

Full coverage on a 12 year old car is almost as bad as making payments on one.

I consider liability to be mandatory unless you have little to no net personal value. You can't squeeze blood from a stone. Comprehensive is quite a bit cheaper than collision but only covers unusual events. Good when you hit that deer (which we did last Feb) or the occasional hail storm but otherwise not that useful. I always go with the $500 deductible on everything to save on the annual premiums. And I usually drop my collision when the net value of the car drops below $4-$5K, if I even remember to check the value of my car. My e39 is still worth a bit so I don't have to think about it yet. My other cars are all 2002s so they're still covered with collision too.

Originally Posted by cn90

Just curious what is everyone doing?

EDIT: Fixed "liabilty" to "collision & comp" as per bobdmac.

I paid just under $30k for mine and I never had collision & comp insurance.

My logic is simple but not for everyone.

Background logic point #1:
- Only insure what you can't afford to replace; and even then, realize that it will cost, on average, in the aggregate, more to insure, than the damage that will occur (otherwise, insurance companies would be out of business).

Background logic point #2:
- Unless you know something the insurance company doesn't know, in the aggregate, they know better than you do what 'will' happen to you, statistically; so they have priced that into their tables (see point #1 which is they plan on staying in business).

With those key tenets in mind, here's my logic (using generic figures):

• Let's say the cars you buy cost roughly $30K dollars, 2 years old, still under warranty (which is your habit, let's say).
• Let's say you drive from age 20 to age 80 (i.e., 60 years driving life).
• Over that driving life, let's say your 'collision & comp' averages, oh, in NJ, about $1,000/year; in California, about half that.
• How much money is that?
  • NJ = $60K, CA = $30K
  • That's one or two complete cars paid for depending on your local costs for insurance (which is the key figure as cars are about the same price, roughly, everywhere).
  • In actuality, it's even more than that because the insurance company was only gonna give you $30K for the car on the first day; every day after that, it dropped in value (as cn90 is intimating) while repair costs don't generally drop a whole lot in value. But, let's skip that, for now.

Now, let's play insurance actuary for a moment.

• You know YOUR driving habits; you know what YOUR neighborhood is like (e.g., theft), you know how YOUR kids drive; you know whether you drive drunk, or whether you drive many thousands of miles, etc.
• So, how many cars do YOU think YOU will total in your lifetime that will be 100% your fault?
  • Hint: How many cars have you totaled so far?
  • Note: If it's someone else's fault, then you don't count it.
• Let's assume, for argument's sake, you'll completely total two cars, all by your own fault (or by theft or acts of God and the like).

Guess what?

• If you lived in NJ, you break even only after you completely total at least two cars (remember, it has to be your fault or theft-like circumstances)!
• So, in NJ, you have to total more than two cars, just to get past the break-even point.

• In California, the numbers are half that.
• You would reach the break-even point when you total the first car.

Here's my summary:
As long as you can afford to replace the "object", it's generally not worth insuring because (and only because) the insurance company knows better than you do what your costs will be and they've priced that into your premium.

The ONLY things I insure are:

• Liability (this 'is' America where one lawsuit can ruin you)
• Medical insurance (this 'is' America where 1 injury could bankrupt you)
• Homeowners insurance (only because the bank requires it!)

So far, what's 'my' track record:

• I've owned a half-dozen cars
• One was totaled due to being run into from behind (that doesn't count in this equation)
• Every other one had some sort of fender bender which I either fixed, or left alone
• Even my beloved E39, which has never enjoyed a day of collision or comprehensive, has been repaired for a broken window glass ($about $150 dollars as per this thread), a dented hood ($800) and the side of the car was sideswiped while parked overnight ($1,200).

All this I gladly paid out of my own pocket, because, you see, I know I 'break even' only when I reach the cost of a completely totaled $30K car in my lifetime. And, I'm nowhere near that at this point.

Disclaimer:
I realize not everyone can afford to replace a car; I realize not everyone sees risk the way I do; and not everyone is as 'good' a driver as I am (defined by not totaling two cars in my lifetime); but, everyone can do the same math using figures that are appropriate to them.

Moral of the story:

1. Calculate, over your lifetime, how much collision & comp costs you
2. Estimate, over your lifetime, how many cars you'll total

If the costs are appreciably greater than the number of cars you'll total, insurance isn't worth it (if you have the cash). Otherwise, get the insurance.

YMMV

Originally Posted by bluebee

I paid just under $30k for mine and I never had liability insurance....

Bluebee, I hope you meant "collision insurance."

Originally Posted by Fudman

I consider liability to be mandatory

Don't all states require liability insurance?

Certainly California does (1).

Originally Posted by bobdmac

Bluebee, I hope you meant "collision insurance."

Ooops. You're right. My blue BMW, which I bought still under warranty, never has had collision or comprehensive. It has liability.

Well, not exactly.

Truth be told, California has three ways of 'proving financial responsibility':

1. Liability insurance (minimum of 15/30/5, I have vastly higher than that)
2. Bond (which is mainly for people who can't get insurance so it's more expensive than insurance)
3. Money (simply put $35K in the bank, and that's proof for EVERY vehicle in your home!)

When I first moved out to California, I did option 3 so I'm intimately aware of it. Then I realized that it just wasn't worth it because my assets started growing so I ditched it. But, I was surprised, I was only the 75th person in all of California to do that (based on my account number and my conversations with the folks in the gov'ment). The weird thing is that this "proof of financial responsibility" covers EVERY CAR in your household, even if you're not the owner or the driver. I am amazed. What a big loophole.

Anyway, I don't think cn90 is asking in this thread about liability. It's the other stuff he's discussing. Again, YMMV (big time) when it comes to taking risk.

I'm really glad you posted this. I need to drop collision on 2 of my cars, and I guess I just didn't realize or think of it (I still think of it as the 18k car I bought it as sometimes). At a value of 5k, it's definitely not worth collision coverage anymore to me.

Do you want to take a chance and save ONLY $ 300 in year ? Sorry guys but I`m not!

Liability, any hit is going to cause lots of headache from the insurance company from lowballing me. Once I caught a 15 year old keying my car with a rock. I made sure he paid for every penny, and I shopped around for the most expensive body shop in town. The repair ended up to be almost $3500 for fixing two doors and a fender.

Originally Posted by bluebee

Don't all states require liability insurance?

Just because it is required doesn't mean people have it. That is another reason to carry collision. But you're point is well taken. If you can afford to replace it, then you don't really need insurance.

Well, here my .02, and experience... (grandpa Drew talking here) I always buy older cars in good shape and fix them up a little to my liking. NEVER have put collision on them.

THEN, I drive very carefully... VERY carefully! Never had an accident worth talking about in 53 years of driving. So multiply that out... lot of savings and you probably never have cussed me out had we crossed paths on the road somewhere...

Ok, ok... I told you this is GRANDPA talking right? Maybe you did cuss me a little if I was over there in the right hand lane going the speed limit!

Originally Posted by wolf888

Do you want to take a chance and save ONLY $ 300 in year ?

Two points:
- You're looking at it the way the insurance company wants you to (nothing wrong with that)
- I suggest you 'try' to consider the "Susie Orman" total-cost way (it's a different perspective on the same numbers!)

How the insurance company wants you to look at it (FUD):

• It costs me (in FL) $300/year to protect < insert actual value of car here >

How I suggest everyone open their minds and look at (perspective):

• It costs me (in FL) $18,000 to protect < insert average value your car here >

I just want you to 'consider' that perspective. Look at your real outlay in cash to protect your real invested value in car. To be fair, you should average the value of your car over its lifetime. If you bought it, say, for $30K and now it's worth, say, $5K, then the average value is somewhere in between and that's the number you should use to be more accurate.

All I'm saying is it's fine to look at the little picture; but it shows intelligence to look at the big picture too!

BTW, your collision & comp are low compared to other people, so that is (always) a factor (it's the major factor in your decision because you're only looking at 'real' losses of $18,000 compared to more than double that for others to insure the same vehicle in another state.

It's hard to get real numbers but, for just one example, see this NJ collision & comp are averaged, in 2008 chart which says:

• Liability coverage cost for 2008: $759.56
• Collision coverage cost for 2008: $423.60
• Comprehensive coverage cost for 2008: $203.30

So, in NJ, in 2008, (average) collision & comprehensive would be something like $600 per year, which is $36,000 for your $10K car. Think about it that way. You pay (real money) $36,000 to insure something that isn't even worth that much (assuming you are at fault for only one or two cars in your lifetime).

SHORT-TERM OUTLOOK IN NJ (FUD):

• It costs me $600/year to protect < insert actual value of car here >

LONG-TERM PERSPECTIVE (INSIGHT):

• It costs me $36,000 to protect < insert average value of car here >

Disclaimer:
Everyone thinks differently when it comes to risk management. And that's OK. I'm simply advocating the long-term outlook be considered using YOUR true cost and your estimate of what your average car is worth (or, what you paid for it, which is the most you'll lose) and your assumption of now many of those cars you'll total (your fault) in your lifetime. I've done the calculations. I can easily total more than two cars and still be ahead by NOT having collision and comprehensive, even here in cheap-insurance California. As always, YMMV.

Originally Posted by BigCo540i

Full coverage on a 12 year old car is almost as bad as making payments on one.

I can live with $600/year for full coverage. If my car ever gets hit, I would at least like them to try to fix it if possible. I still like my car.

Insurance is not required in NH unless you've been busted for DUI.

Originally Posted by Jimmys 530i

I shopped around for the most expensive body shop in town. The repair ended up to be almost $3500 for fixing two doors and a fender.

As we all know, insurance repairs are rife with over estimates!

Somebody sideswiped me while my bimmer was parked on the street in San Jose, a couple of years ago (when it was still worth in the $20K range).

• Stevenscreek BMW, in San Jose, sent me to a body shop
  • Their estimate was, I kid you not, $8K (all new parts)
• I went to a few body shops in San Jose
  • The estimates ranged from over $4K to (all new parts) to $1,200 (few new parts)
• I paid $1,200
  • Subtract $1,200 from my $40K lifetime quota.

Originally Posted by Fudman

Just because it is required doesn't mean people have it

Oh. Yes. Good point.

Here in California, there are (it is said) a lot of people sans insurance (although I don't know the percentage, probably low in reality).

But, the laws are in your favor (proof of insurance is required to register in CA, although I suspect you can fudge that). And, there 'is' uninsured motorist coverage ...

My rationale is still the same, which is I'm trying to teach some of you to 'consider' the long-term Susie Orman style perspective:

• Calculate your lifetime costs to replace (average value of your car)

I've done this calculation. The great thing about collision and comp calculations is the most you risk is the total current value of your car.

I've calculated I need to total more than two of my own cars in my life just to break even on what collision & comprehensive costs. For me, that's not worth it. I sleep very well with that decision. As always, YMMV.

Originally Posted by Fudman

Just because it is required doesn't mean people have it. That is another reason to carry collision.

Well, actually, that's what the Uninsured/Underinsured coverage (it's the "backside" of your liability) is for.

Generally:

Collision indemnifies the insured driver when they hit a stationary object: hit a deer that jumps in front of you=Comprehensive; hit a dead deer in the middle of the road (or utility pole, guard rail, etc) =collision. Collision will also pay the driver for damage to their vehicle if they are at fault in a two (or more) car accident. The driver's primary liability will pay for damage and injury to the other party(ies).

Collide with someone with too little insurance to cover your damages (their fault) = Underinsured (UIM)

Collide with someone with no insurance to cover your damages (their fault) = Uninsured (UM)

Best practice might be to match your UM/UIM to your Primary liability to properly cover expenses in the event of either of these two situations.

I'm done now.

Succinctly put Menhir.

I recently took collision off of my vehicles mainly b/c once you are in the $4-5k value range ... any at fault "accident" is typically going to be > 40% of the value of the car (let's assume value =$5k, so ... that would be ~$2,000).

Most insurance companies "total" or "total loss" a car (unless insured for agreed value or stated value) around the 40% damage to actual cash value mark (if you are lucky) ... if you are at fault in the accident.

These "assumptions" vary widely by state and insurance company as each company has different thresholds / criteria for each specific state.

Off-topic.... I recently changed to Progressive and took collision off both my 10+ year-old cars, but still have comprehensive and roadside (cheaper than AAA). They gave me a small "Snapshot" device to plug into the OBCII port and monitor my driving habits. It's a chance to cut some of the premium, so I took it, but the device is not compatible (they say....) with the e39, only my other car (Subaru). Probably a good thing as I drive like Granny in the Sube and Bubba in the bimmer.

Originally Posted by AnotherGeezer

I can live with $600/year for full coverage. If my car ever gets hit, I would at least like them to try to fix it if possible. I still like my car.

Insurance is not required in NH unless you've been busted for DUI.

If your car gets hit the hitters insurance would cover you.

Originally Posted by AnotherGeezer

I can live with $600/year for full coverage. If my car ever gets hit, I would at least like them to try to fix it if possible. I still like my car.

FULL coverage is really limited coverage. Its limited to only a % of what the insurance co says your car is worth.

Originally Posted by pleiades

Off-topic.... I recently changed to Progressive and took collision off both my 10+ year-old cars, but still have comprehensive and roadside (cheaper than AAA). They gave me a small "Snapshot" device to plug into the OBDII port and monitor my driving habits. It's a chance to cut some of the premium, so I took it, but the device is not compatible (they say....) with the e39, only my other car (Subaru). Probably a good thing as I drive like Granny in the Sube and Bubba in the bimmer.

Have you considered Liberty Mutual? They are affinity partners with Subaru AND BMW which allows special discounts on automobile insurance for their customers.

I transferred to Liberty from Progressive when I had my Subie (SOA littered my mailbox with letters suggesting I call for a quote, so I caved and made a call) and was thrilled that the same discounts apply to BMW when I replaced my Impreza. The policy includes 24/7 roadside assistance. The savings were quite good, too.