Was switching to liability a good move?

[GREENBACK]

I currently have a 10 yr 4wd truck that I drive less than 10,000 miles a year. It's mainly a truck to haul things and for winter travel. I recently switched insurance coverage to liabilty only on it. It has about 100k on it and I believe the blue book value is about $7000.
The savings on insurance bills was pretty good but ,of course, if I wreck it the repairs or replacement are on me. I do have the cash to take care of that if neccesary but don't like the idea of it.
a part of me thinks I jumped the gun a little fast here but If nothing bad happens I can pocket a few hundred extra bucks a yr. to eventually replace it.
BTW, I do plan to drive it til it won't go anymore. At what point would you switch to minimal coverage like this?

[Investing First Steps]

Well one thing you have to remember about car insurance is that if it wasn't on average a "bad deal" there wouldn't be much incentive for them to provide the service. Typically my approach to insurance is to carry it for outcomes I simply can't afford, or occasionally in cases where they are able to get deals that I would not be able to get. So for example, I might carry comprehensive car insurance because they can usually get better deals on repairs than I do.

If the $7000 will not cause you significant financial harm if you total the truck, then I think it's on balance probably a decision that will save you money. And of course there's the "Peace Of Mind" premium. Obviously you're at least a little worried about it or else you wouldn't be posting. Be sure to value that in your risk/reward calculations.

[MonkeyMama]

Our personal rule is to drop collision once car drops below $5k value.

I would say it depends on your financial situation AND your driving record. If you're never going to be at fault for an accident, and you have the cash to spare, it is a complete waste of money. If you have caused many accidents, you may always need collision insurance. Most people fall in the middle.

Are you uncomfortable because this is too much risk for you financially? OR are you just uncomfortable because of a Murphy's Law kind of thing? If it's the latter, you'll get used to it.

We've almost never had collision insurance (mostly driven older cars). It's a gamble, but certainly paid off for us. (We've both been driving 16 years?) We'll probably raise our $5k limit at some point. It's just our comfort point for now.

[GREENBACK]

I have pretty good piece of mind. I dont worry about getting in a wreck. I would probably kick myself if I did total it after dropping the comprehensive coverage but guess that's the gamble I'm taking here to hopefully save some money in the long run. I'm really interested to see at what point others might consider this type of move.

[GREENBACK]

I have an excellent driving record and financially it won't hurt me if something bad happens but the vehicle would need to be replaced and I wouldn't care to do that too soon. Mr. Murphy is probably reading my every word here and is ready to strike...lol.
I had never heard of the 5k guideline but it's an interesting thought. Would that rule apply to someone who can replace the vehicle with cash versus someone who might need to finance a replacement?

[Gjowers]

Remember the insurance company might not value your truck as high as you do. They will total cars rather than pay expensive repair bills. Since the truck is 10 years old, I'd say you made the right decision.

[noppenbd]

In my case, it costs me $180 a year to provide collision coverage on my vehicle worth about $5600, with a $1000 deductible. So if I total a car once every 26 years it is worth it to keep the collision coverage. Personally, I think it is worthwhile to keep it.

[MonkeyMama]

Originally Posted by GREENBACK

I have an excellent driving record and financially it won't hurt me if something bad happens but the vehicle would need to be replaced and I wouldn't care to do that too soon. Mr. Murphy is probably reading my every word here and is ready to strike...lol.
I had never heard of the 5k guideline but it's an interesting thought. Would that rule apply to someone who can replace the vehicle with cash versus someone who might need to finance a replacement?

It's just my personal rule - I don't borrow for cars. So I would say yes, only if one could pay cash to replace it. (& for me personally I would be dandy to just go pick up an old clunker for $1k and drive it a few years - so another reason, for me). If I totaled my car I wouldn't necessarily replace it at that level.

I got the $5k rule from my dad and it just stuck.

GJowers makes a good point too. Say KBB is $5k, insurance offers you $4k, and you have a $1500 deductible. Your insurance is worth $2500 cash; not $5k. So, yeah, kind of why we go with the $5k. I kind of figure when I think the car is worth $5k, the insurer thinks it is worth less anyway. I may be only out $2500 more than I Would be otherwise if I Were to be found at fault for a crash. I don't remember when we dropped collision on my spouse's car (when it passed the $5k mark) but the other thing is it continues to drop in value, so your risk lessens every year. It's only the first year or 2 you worry about Murphy. Then the car is worthless anyway.

I personally insure for catastrophe. Totaling a car worth $5k or less is not a catastrophe in my eyes. It may be if I had to finance another car though. Pretty much what it comes down to, for me.

[GREENBACK]

Good way to think about it. To replace this vehicle as a new one would be in the 40k range which I wouldn't do although it has the same value to me and is still in pretty good condition. In the past I've basically waited til a vehicle was on it's last legs(this one isn't) to adjust the insurance.
I feel a little better about this now and believe it probably was the right move.

[LivingAlmostLarge]

Monkeymama, I think we're thinking along the same lines. That's about where we dropped collison as well.

Greenback we have cheaper cars than you so hitting $5k wasn't hard. It might have been a different story if we'd had more expensive cars.

[creditcardfree]

I'm not against dropping collision. We did it on a car that had a $2K value. We intended to drive it into the ground, too. Instead, my husband had a medical issue and drove it into a bank!! True story. So while the ambulance took him to the hospital the police department put the vehicle in the impound lot.

Our insurance covered the bank damage, but while my husband was in the hospital I had to handle getting the car towed out of the impound lot, paying two towing fees and impound fees. I had a car guy look at it and said it would cost more than it was worth. We sold the car for $200...just enough to cover all those fees that racked up. Then, of course, we were in the market for a new car!

I do wish we just paid to have it fixed...but that is a mute point now. If I had something other than liability, the insurance would have handled the whole impound issues, towing, and valuing the car...while I was with my husband in the hospital.

My point...there can be nonfinancial issues to carry more than liability insurance. Just something to consider.

[GrimJack]

One point that I ran up against is "who is going to fight for you?" - I made the decision to drop collision on my 16 year old Corolla (I bought it new on the condition that I kept it at least 10 years) and just keep the liability. I was in an accident that could have been either's fault - my insurance company had no reason to fight the other company, ruled the accident my fault, paid for the other car, and dinged my coverage. I replaced the car but instead of 'no fault' I have higher insurance rates for a couple of years - I don't know if I saved money by dropping collision.

[GREENBACK]

Maybe the best rule should be if you have the cash to replace the loss of the vehicle without it causing a major financial strain then it's time to at least think of minimal coverage on the vehicle.

[Pitman]

Once my car was paid off, I made the switch to liability. With full coverage I was paying 3K a year, on liability, I'm only paying $900.