To drop or not to drop collision coverage

[rationull]

My auto insurance renewal just came up (I pay annually) and I'm debating whether to drop collision coverage on my 2007 Civic. The car is long paid off so I can cover it however I want. I can afford the coverage, but it annoys me to no end that the every line item on the policy is a good bit more expensive for the Civic than for my wife's Mazda3. The cars are effectively the same from a practical standpoint and if I wanted to be lightly gouged on insurance I could be driving a much more entertaining car and paying just a little more than I am for this thing. The policy is a good high limits one but I have the deductibles set high to keep the rates lower.

On the one hand I could save several hundred dollars a year by dropping the collision coverage. On the other hand I'd hate to have to pay several thousand to fix the car up if I make a stupid mistake, when the money could be better allocated into the fun car fund.

Yes, I realize this is the fundamental tradeoff related to insurance. I think I know what I'm most comfortable doing already, but I wanted to see what conclusion others have come to in this situation. When do you draw the line where you stop covering a new or nearly new vehicle for collision?

 

[eljefino]

Drop it. You'll be able to decide if you want to (effectively) write it off if you get hit a certain way.

 

[demarpaint]

Can you afford to replace it without financial heartache, if you can't effectively write it off if you get hit a certain way? If so then drop it, if no then keep the coverage, and raise the deductible if you like.

 

[mongo161]

The only drawback is IF you rent a lot of vehicles during the year, and you refuse the rental company's insurance, you will no longer be able to do so under your personal auto insurance policy. That means that you'll have to purchase the collision coverage at the rental counter for the vehicle that you rent along with the other coverages.

This drawback only applies if you rent a lot of vehicles and have collision coverage in the past on your personal vehicle.

 

[fsdork]

At the end of the day, insurance companies make money because they charge more in premiums and deductibles than they spend in claims. Therefore, insurance isn't a good "investment", except as peace of mind. As other posters have said, if you can afford to replace the vehicle, drop the coverage.

 

[Carbon]

If you have an accident, having the collision insurance can minimize stress at a stressful time. If the accident is somebody else's fault, it is handy to let your company pay for the fix and try to collect from the other driver.

Economically, dropping the insurance makes sense.

 

[01rangerxl]

I say if the vehicle is paid for, and you can afford to replace it if necessary, drop the full coverage.

I've only ever had liability coverage on my vehicles, and so far I don't regret it. I did end up wrecking my Ranger pretty bad, but it was drivable afterward. I've been repairing it a little at a time, while continuing to drive it daily. A new bed, some paint, and some tweaking to the bumper mount and I will be done with the repairs. Right now I'm only out $400 for repairs, thanks to Certifit and eBay. With full coverage my deductible would have been more than that, and the insurance company would have totalled the truck anyway (entire passenger side including the cab was a mangled mess). It also would have had a salvage title. I think in this case full coverage would have been a waste of money. The truck drives perfectly fine, I've got less than one insurance payment invested in the repairs, and the title is still clean.

If you can't put a fender on yourself, are accident prone, or don't have the means to get another vehicle, maybe full coverage is a better idea. My parents always pay off their vehicles in full, but for some reason they think full coverage is needed for everything. They will have full coverage on a 15 year old car with 130,000 miles "just in case," even though they can afford to replace it. They just love buying insurance for everything. I hate giving money to insurance companies, so I go for the very minimum I can get away with.

 

[sciphi]

If you are going to be severely displaced if your car gets totaled in a collision you cause, keep it. I still have it on the Buick since it's my only way to work, and I'm not the world's best driver by a very long shot.

 

[IndyIan]

How much is your Civic worth in this used car market, $10k?
If you're only saving a couple hundred a year then I would keep collision on for a while yet. On average you shouldn't need insurance at all but unless $10k is pocket change for you it would suck to buy another Civic out of pocket...
I don't carry collision on the Neon but we do on the Tracker, its like $140 for maybe a $5k vehicle so its not a big expense. Another couple years and then we'll drop it.

 

[The Critic]

Your Civic is still worth 9-10k on a private party sale. I would keep the collision coverage at least until the car is worth 5-6k. Collision repairs these days are very expensive; just a new bumper cover and respray can cost $1k.

 

[nfs480]

A 2007 sounds too new to be dropping collision coverage to me.

 

[rationull]

Originally Posted By: The Critic
Your Civic is still worth 9-10k on a private party sale. I would keep the collision coverage at least until the car is worth 5-6k. Collision repairs these days are very expensive; just a new bumper cover and respray can cost $1k.


This most succinctly states what I think my position is.

Originally Posted By: IndyIan
... it would suck to buy another Civic out of pocket...


and this.

It's a good car but if something really bad happened to it realistically I'd either replace it with a $3-5k fun beater or with something new a little more expensive and very different. They do hold their value and it would suck to lose that "equity" if it had to be replace for any reason (including b/c it was wrecked).

One of the glorious side effects of these cars holding their value is that the insurance is expensive (at least I'm told that's one of the myriad reasons). The reason this burns me is that historically it's been almost double what we pay for the Mazda which is one year newer, lower miles, and technically faster and more practical. Although truth be told the gap is much smaller on this renewal policy than it has been in the past so I'm a little less burned this year. Still a chunk of change but when it comes down to it I think it's still over my threshold.

 

[JHZR2]

Originally Posted By: The Critic
I would keep the collision coverage at least until the car is worth 5-6k. Collision repairs these days are very expensive; just a new bumper cover and respray can cost $1k.


It would be really dumb to use collision/comp o pay for a $1k repair. If/When we have collision/comp, we have a $2500 deductible. I don't think I'd invoke collision/comp until the repair hit about $4-5k, so that insurance was paying out $1500+ on top of the deductible.

To have an insurance company not total the car, it would need to be worth at least $6k, I guess, so I agree on the valuation cutoff.

But IMO $500 deductible is a bad move.

And if someone is concerned with affording more than a $500 deductible if their car is harmed, Id say they probably can't afford a new car. Dave Ramsey recommends $1MM net worth before buying a new car. That may be a bit out there, but not far from the truth.

 

[IndyIan]

Maybe just sell your Civic now and get either your fun beater or the newer car you want? Sounds like you're bored with it and its not even worth your collision premium to you. $10K plus some more gets a nice Miata or whatever your interested in.

 

[JHZR2]

Originally Posted By: Carbon

If the accident is somebody else's fault, it is handy to let your company pay for the fix and try to collect from the other driver.

Economically, dropping the insurance makes sense.


That is a good point, having gone through the hassle of a poorly insured at-fault driver, it could be helpful. But the hundreds of dollars year after year might be able to pay for your own counsel in the once in a long while that something does occur.

 

[ls1mike]

Keep it. I have it on everything with a 300 dollar deductible.
Even my 98 Buick with 76,000 miles on it.

 

[ARB1977]

No worth dropping if you ask me. I thought about going to minimal coverage in the Jetta since it is 13 years old. If your deductible is more than what the cars worth then drop it. I'm keeping full coverage on the Jetta.

 

[lairdwd]

Originally Posted By: mongo161
That means that you'll have to purchase the collision coverage at the rental counter for the vehicle that you rent along with the other coverages.

This drawback only applies if you rent a lot of vehicles and have collision coverage in the past on your personal vehicle.


If you have a credit card that provides good rental coverage (visa, mastercard, amex) - you don't need to take the rental agencies insurance.

I was in the exact same position. No collision, no comprehensive. I did extensive research on this. My Visa signature card provides secondary coverage. When there is no primary, they become the primary. It's right in their contracts you can read for yourself. It's actually better - no deductable!

The only caveat is that you need to rent from an agency that will provide their fleet utilization logs to the credi card company in case of an accident. Which ones provide the logs is a bit of a mystery to me still. I know Enterprise does, and I will not rent from an agency unless I confirm they do provide logs in case of accident.

 

[antonmnster]

We keep full-coverage on both the 02 325Ci with 146,000 mi and the 00 A6 with 173,000 miles.

For a couple hundred dollars a year, we're protecting assets that would set us back far more than the premiums if something happened.

I can't see putting myself in a position where I have to either shell out thousands for a repair or have to suddenly go buy a new car if I screw up, even though I've never had to file a claim.

Once the cars' value gets down <$2-3000 or so I think it's fine to drop it. The Audi is almost there, but even so, it just doesn't seem very bright to leave it uncovered.

 

[mechtech2]

I wouldn't drop it yet. Maybe in a couple of years/