Insurance deductibles

[accountingsucks]

I am wondering at what point it's a good idea to forego collision coverage, or at least increase the deductible. I have a 2000 Toyota Celica that is worth around $10K Canadian. My deductible is $200 for collision because I have been claims free (originally $500). If I increased this to the next step up at $1000 I would save $70 a year in insurance, however I would not be eligible for the reduced deductible. In other words my deductible would go from $200 to $1000 with no chance of going lower ever. For this I would save $70 a year. What do you guys think?

Also, should I even be carrying collision coverage on my vehicle since it is getting so long in the tooth? I pay $460 a year for collision right now which is close to 5% of my vehicles value. At some point I should probably drop collision coverage.

Raising my comprehensive from $250 to $1000 results in a $7 per year savings so I am not touching that one.

Thoughts?

 

[FinanceDude]

I am wondering at what point it's a good idea to forego collision coverage, or at least increase the deductible. I have a 2000 Toyota Celica that is worth around $10K Canadian. My deductible is $200 for collision because I have been claims free (originally $500). If I increased this to the next step up at $1000 I would save $70 a year in insurance, however I would not be eligible for the reduced deductible. In other words my deductible would go from $200 to $1000 with no chance of going lower ever. For this I would save $70 a year. What do you guys think?

Also, should I even be carrying collision coverage on my vehicle since it is getting so long in the tooth? I pay $460 a year for collision right now which is close to 5% of my vehicles value. At some point I should probably drop collision coverage.

Thoughts?

All my car deductibles are $1000. Is tha car paid off? Assuming yes, you could drop collision, as a significant wreck would total the car anyway.

I have a personal rule I follow....if the wholesale value of my car is under $7000, and I don't have a loan on it, I drop the collision..........however I carry a TON of liability coverage, $300K through insurance, and $5 million in umbrella.........

 

[W2R]

I will be interested in seeing what people say in response to your post. I have a 2000 Toyota Camry Solara, and I have never carried more than minimum liability insurance on it. I have been told that is unwise though I really do not understand insurance very well. I do know that I have saved thousands in insurance over the years, and I am more than happy to pay for any damage to my car myself, even if it was to be totalled.

ETA:

I have a personal rule I follow....if the wholesale value of my car is under $7000, and I don't have a loan on it, I drop the collision..........however I carry a TON of liability coverage, $300K through insurance, and $5 million in umbrella.........

Maybe that is what I should be doing. I'd hate for some jerk to take my ER nestegg from me.

 

[figner]

I dropped collision/comprehensive once my car was worth about 5-6k. That's about the point where I'm comfortable self-insuring, meaning I wouldn't be kicking myself if I had to eat the whole cost when the car got totalled. My deductibles are all $1000 since I don't think it's worth making a claim (and possibly having my insurance rates go up) for less.

While I was poor I got by with minimum liability, but would never do that once I had significant assets. All it takes is one unfortunate incident for someone to sue you for large sums. Now I carry the max liability plus umbrella insurance on top of that.

 

[MasterBlaster]

I have a personal rule I follow....if the wholesale value of my car is under $7000, and I don't have a loan on it, I drop the collision..........

I have that rule too.

However be forewarned, if an idiot (and there are many) runs into you. You will be responsible to collect from such person. Even if they have insurance, the other party's insurance is bound to act in bad faith. They will push you around just cause they can.

You can do the small claims court thing at great hastle to yourself. If the other party doesn't have insurance then you just won't be able to collect.

So, the take-away from this is. Before you drop collision, you should be prepared (mentally) to swallow the damages to your car regardless of who is at fault.

I have an extended training session in this area from the school of hard knocks.

 

[RunningBum]

My understanding is that you probably want an umbrella policy (aka personal excess liability policy, or PELP) to cover your assets that could be lost in a lawsuit. Some things, *I think* like a 401K, are protected already. There's no reason to cover more, because I think that they can look at your $1M in assets and $1M PELP and sue you for $2M. $1M is the limit based on those assets.

The insurer will require your auto and home policy liability limits to be quite a bit higher than the minimum. 100k/300k at least, maybe 300k/500k.

Aside from protecting your ER nestegg, which is a great comfort to me in this age of lawsuits, I've heard that you will get your insurance companies lawyers behind you if there is a suit.

For deductibles and keeping collision coverage on at all, that's really evaluating your own risks. Does ER mean you can stay in if the weather is bad, and not drive in rush hour traffic, or does it mean you are moving to the Ozarks and might be driving in the snow for the first time? And are you willing to pay for a small claim or live with some dents and dings, or do you like to keep your car in perfect shape?

I kept collision with a high deductible on my SUV but not my Miata because the SUV is the one I'll drive in bad weather, but don't want to file a claim and possibly see higher rates for a small accident.

 

[MasterBlaster]

RB:

Your topic digresses from what the OP asked about... However, responding to your post...

Can you ever have enough insurance ?

That $1M insurance for your $1M assets is just a rule of thumb. If you were to pull out in front of that busload of trial lawyers injuring them all, then your $1M umbrella policy wouldn't go that far would it ? In that case you could kiss your unqualified net worth good-bye.

The insurance equalling your net worth is just a rule-of-thumb. It's probably pretty good advice, but it's just a guideline.

 

[Coach]

I will be interested in seeing what people say in response to your post. I have a 2000 Toyota Camry Solara, and I have never carried more than minimum liability insurance on it. I have been told that is unwise though I really do not understand insurance very well. I do know that I have saved thousands in insurance over the years, and I am more than happy to pay for any damage to my car myself, even if it was to be totalled.

Want2retire, good for you -- at least as far as collision and comprehensive are concerned. Insurance should protect you from catastrophic loss -- if having to replace the car out of your own pocket isn't catastrophic, then you're doing the right thing.

I'd be nervous with minimum liability, though -- assuming you don't have an umbrella liability policy. There your potential loss is many multiples of the value of the car.

Coach

 

[ziggy29]

I'd be nervous with minimum liability, though -- assuming you don't have an umbrella liability policy. There your potential loss is many multiples of the value of the car.

I'd be amazed if you could even *get* an umbrella policy while carrying minimum liability on your auto policy.

In my experience, you usually had to crank up the underlying liability of your auto and home policies up to 300K/500K (auto liability) and 500K (homeowners) to qualify.

 

[travelover]

I'd be amazed if you could even *get* an umbrella policy while carrying minimum liability on your auto policy.

In my experience, you usually had to crank up the underlying liability of your auto and home policies up to 300K/500K (auto liability) and 500K (homeowners) to qualify.

My experience, too.........

 

[kumquat]

While you're at it, you might check what rates you can get from other companies.

 

[RunningBum]

RB:

Your topic digresses from what the OP asked about... However, responding to your post...

Can you ever have enough insurance ?

That $1M insurance for your $1M assets is just a rule of thumb. If you were to pull out in front of that busload of trial lawyers injuring them all, then your $1M umbrella policy wouldn't go that far would it ? In that case you could kiss your unqualified net worth good-bye.

The insurance equalling your net worth is just a rule-of-thumb. It's probably pretty good advice, but it's just a guideline.

Thanks, I've wondered about that for a long time.

And for the record, I wasn't the one to start going off-topic with liability insurance, and I did end my post trying to get back on track with the collision coverage discussion.

 

[Rustic23]

I carry $2,000 deductible, and keep collision until the Vachel reaches a value I am comfortable with replacing. Our Pilot is less than a year old, and it would hurt if I had to put out the cash to replace it now.

 

[jazz4cash]

Sentry Auto Insurance

Anybody heard of them? They are based in WI, I believe. They had a cash-back policy for accident free driving. 5 yrs with no claims and you get 50% of the 1st yr premium refunded. The following yr 50% of the 2nd yr premium and so forth. The premiums were competitive, too. You had to sign a waiver of collision coverage if you had a DUI at the time of an accident (not a problem for me). Saved us alot of money before we moved to MD where they did not offer this feature. Sorry I know its a bit off topic..........

 

[eridanus]

That $1M insurance for your $1M assets is just a rule of thumb. If you were to pull out in front of that busload of trial lawyers injuring them all, then your $1M umbrella policy wouldn't go that far would it ? In that case you could kiss your unqualified net worth good-bye.

In that case, my mortgage would be paid off faster than OJ could move to Florida.

 

[RedHawk]

I have never carried more than minimum liability insurance on it. I have been told that is unwise though I really do not understand insurance very well.

If you are saving for ER (which I assume means you have or are planning to have a nice nest egg) I think you need much more than the minimum liability which I believe in LA is only like 10 or 20k. Remember liability is what you would owe someone for an accident that is your fault. For instance if you totaled someone's Mercedes that could be 20k right there before you even start talking about medical, lost wages etc. Could easily reach large six figure numbers. I know insurance is expensive in New Orleans, but I would increase that liability number drastically (may be 500k).

 

[Gumby]

In that case, my mortgage would be paid off faster than OJ could move to Florida.

Actually, in many states, it would be better to have a mortgage, as your homestead exemption covers the equity in the property. If you have no mortgage, the value of the property may exceed the exemption amount and your house would be subject to the claims of your creditors.

 

[brewer12345]

Anybody heard of them? They are based in WI, I believe. They had a cash-back policy for accident free driving. 5 yrs with no claims and you get 50% of the 1st yr premium refunded. The following yr 50% of the 2nd yr premium and so forth. The premiums were competitive, too. You had to sign a waiver of collision coverage if you had a DUI at the time of an accident (not a problem for me). Saved us alot of money before we moved to MD where they did not offer this feature. Sorry I know its a bit off topic..........

They look to be a large, well run mutual.

 

[FinanceDude]

Anybody heard of them? They are based in WI, I believe. They had a cash-back policy for accident free driving. 5 yrs with no claims and you get 50% of the 1st yr premium refunded. The following yr 50% of the 2nd yr premium and so forth. The premiums were competitive, too. You had to sign a waiver of collision coverage if you had a DUI at the time of an accident (not a problem for me). Saved us alot of money before we moved to MD where they did not offer this feature. Sorry I know its a bit off topic..........

I have had them for the past 12 years, and yes I get 50% of my premium from 5 years ago in a check every May. They don't offer the policy anymore, because Sentry knows they are losing money on it. Also, the premium goes up EVERY year as a "feature"........

 

[FinanceDude]

RB:

Your topic digresses from what the OP asked about... However, responding to your post...

Can you ever have enough insurance ?

That $1M insurance for your $1M assets is just a rule of thumb. If you were to pull out in front of that busload of trial lawyers injuring them all, then your $1M umbrella policy wouldn't go that far would it ? In that case you could kiss your unqualified net worth good-bye.

The insurance equalling your net worth is just a rule-of-thumb. It's probably pretty good advice, but it's just a guideline.

Maybe Martha will weigh in. However, based on conversations with a couple lawyers I know, the company that underwrites the umbrella will fight a lawsuit, even to the tune of legal help, expert witnesses, etc.

The way I look at it, the lawyers for the people trying to sue you are attracted by big numbers. Why sue me for $2 million when they can sue the insurance company for $5 million??

 

[teejayevans]

If you are saving for ER (which I assume means you have or are planning to have a nice nest egg) I think you need much more than the minimum liability which I believe in LA is only like 10 or 20k. Remember liability is what you would owe someone for an accident that is your fault. For instance if you totaled someone's Mercedes that could be 20k right there before you even start talking about medical, lost wages etc. Could easily reach large six figure numbers. I know insurance is expensive in New Orleans, but I would increase that liability number drastically (may be 500k).

Depends on the state but generally you pensions (incl. 401K) and IRAs
cannot be touched. And if you apply for bankruptcy you can protect
your home.
This may be a good reason to spend down your taxable accounts first.
TJ

 

[Martha]

Depends on the state but generally you pensions (incl. 401K) and IRAs
cannot be touched. And if you apply for bankruptcy you can protect
your home.
This may be a good reason to spend down your taxable accounts first.
TJ

Even if you file bankruptcy, the extent your home is protected is mostly a function of state law. If you chose the federal bankruptcy exemptions, there is only a small homestead exemption. So, if you have a lot of equity in a home, generally people chose the state exemptions even when they file bankrutpcy. Some states provide a big homestead exemption (think Florida and Texas) and some very small.

Interesting comment on using taxable accounts first.

As far as the OP's question, we ditched collision insurance on our car, which is probably worth about $10,000. We keep it on the motorhome.

W2R, increase those liability limits!

When thinking about umbrella policies I don't think about the value of our assets, I think about the risk of being sued and typical lawsuit settlements and recovery. Do you have rental property or a teenage son driving your car? Higher umbrella limits for you. The cost of defense does not come out of the umbrella amount.