When to drop collision coverage on an older car?

[TBH]

We drive a 2003 Japanese car that we bought about 4 years ago. We take pretty good care of it, and it has about 115,000 miles on it. We share the car between two drivers, and we are hoping to drive it for another 5 years or so. Then we'll buy another 5 or 6 year old used car. We live in the city and use it for running around town and occasional driving vacations, but not really for commuting.

I'm wondering when it will be time to drop collision/comprehensive coverage from our insurance. I just checked Kelly Blue Book and it's valued at $4600. Comprehensive costs $42 a year with a $500 deductible, and collision is $240 a year with a $500 deductible.

Is there a rule of thumb for when you should drop this coverage?

We have a healthy emergency fund and could buy another used car pretty quickly if needed (although it does take some time to find the kind of low mileage Japanese economy cars we like to buy.)

I sure would like to have that extra $280 a year I'm paying for that coverage, but a $4600 asset is still significant.

Advice?

[Retired To Win]

I drive a 1996 Dodge Dakota pickup. Bluebook is about $5000. I maintain full insurance coverage on my vehicle -- because it is worth MORE than $5000 to me. I keep the vehicle in top repair, so I KNOW I can rely on it. And I have no interest in having to buy another one. That will only happen if the truck gets totalled in an accident.

So, in your case, what is the answer to my implied questions?

And, looking at it another way, $280 is just 6% of $4600. How outrageous is that, really?

[HappySaver]

I drive a 1996 Dodge Dakota pickup. Bluebook is about $5000. I maintain full insurance coverage on my vehicle -- because it is worth MORE than $5000 to me. I keep the vehicle in top repair, so I KNOW I can rely on it. And I have no interest in having to buy another one. That will only happen if the truck gets totalled in an accident.

So, in your case, what is the answer to my implied questions?

Great advice. I drive a 2004 Japanese car with 90,000 miles. I do NOT want to have to replace it. I have no plans to drop coverage on it.

[JoeP]

The term "totaled" conjures visions of a mangled wreck wrapped around a tree with the engine lying 50 feet away and you can't even make out the make of the car. In reality, it means that the cost to repair exceeds the blue book value (or ~80% of that value) of the vehicle, and the insurance company decided that they'd write it off rather than spend their (your!) money repairing it. You'll get a check for the blue book value minus deductible.

Personally, with an older car, I drop collision but keep glass. I do this because the blue book value is ALWAYS less than the value I put on my vehicle. If my $3500 blue book value car gets into a wreck, the collision work would probably exceed $2800, so I simply won't file a claim, and will get the repairs done myself for less.

So my suggestion would be to weigh the benefit of paying for collision against the chance that your insurance company would decide that your car would be considered a total loss and you'd not get the benefit you expect.

[KTP]

I really should self insure now that we pay cash for our vehicles, even new, but I keep full coverage if the vehicle is worth more than $8,000 to $10,000.

[Eagle]

I drive a 1996 Dodge Dakota pickup. Bluebook is about $5000. I maintain full insurance coverage on my vehicle -- because it is worth MORE than $5000 to me. I keep the vehicle in top repair, so I KNOW I can rely on it. And I have no interest in having to buy another one. That will only happen if the truck gets totalled in an accident.

So, in your case, what is the answer to my implied questions?

And, looking at it another way, $280 is just 6% of $4600. How outrageous is that, really?

Great advice. I drive a 2004 Japanese car with 90,000 miles. I do NOT want to have to replace it. I have no plans to drop coverage on it.

I agree with Reitred to Win and HappySaver. We have a Honda Civic 2007 with 69k miles on it and a Toyota Sienna 2004 with 150k miles on it. We have full coverage on both cars and keep up the maintanance. We pay 585 every 6 months for both car's car insurance. We don't want to have to replace it cash were an accident to happen and the vehicle would be totalled.

[MonkeyMama]

Our rule of thumb is to drop collision around the $5k point.

The reasons are that by the time we realize and get around to it, our vehicle is worth $3k-$4k. (Case in point, I've been reluctant to drop full coverage on current vehicle, but this post spurred me to check kbb and it's only worth $3k-$4k at this point! Dropped like a rock since I last checked). We have a high deductible and lord knows what the insurance company would value it at, so I consider it pretty worthless insurance at this point (I'd rather save the $280 than pay for worthless insurance).

That said, I think risk should be a factor. If you get in an accident multiple times a year (like some of my friends) the insurance is probably worthwhile. We have yet to file a single insurance claim (knock on wood), and so I consider it a low risk decision. This lends to us being pretty aggressive on just dropping the coverage (compared to average).

[TBH]

Thanks for the thoughts, all.

I decided to keep comprehensive (which includes glass) and drop collision. This means I will have to purchase extra insurance when I rent a car, because I don't want to be on the hook for an expensive rental car, but I rent cars so rarely (once a year for 3-4 days, tops) that I think it's still better to save the collision premiums.

[MonkeyMama]

Thanks for the thoughts, all.

I decided to keep comprehensive (which includes glass) and drop collision. This means I will have to purchase extra insurance when I rent a car, because I don't want to be on the hook for an expensive rental car, but I rent cars so rarely (once a year for 3-4 days, tops) that I think it's still better to save the collision premiums.

Also, check with your insurer for options. To be fair, last I did this we had full coverage, so I will probably have to research again myself, to make sure this is ample insurance without collission insurance. But we picked up "non owner coverage" from our auto insurer last time we rented a car. IT cost $30 per year or so?? We added it for a couple of weeks and then took it off, which cost a few bucks. WE also considered American Express coverage for a few dollars, but for whatever reason I think we decided the non-owner-coverage was more robust and/or a better deal.

[Randomsaver]

I only have comprehensive ever since. Way to save money. Have 2 cars and pay about $400 every 6 months total. Been hit 3 times but the hitter always paid for my repairs. I'm a defensive driver also and that helps me alot.