Car insurance question

January 22, 2009 11:48 AM

CarInsuranceFilter -- Liability only or more? car insurance for 1997 Jetta with 95,000 miles?

I have a 1997 Jetta with 95,000 miles, paid off. Should I just have liability insurance? (I have had full coverage, but it seems like overkill.)

posted by ClaudiaCenter to travel & transportation (14 comments total)

Do you have enough money today to buy a replacement car tomorrow? If not, get full coverage.
posted by banannafish at 12:00 PM on January 22 [2 favorites]

A car that old, even with the relatively low miles, has a fairly low book value. That's what the insurance company will use to make a decision about whether to total it or not if you make a claim. They will typically total it if the cost to repair it is more than 3/4 of the book value. So, as a car ages, it takes less of an accident to cause it to be written off.

If you're in an accident and someone else is found to be at fault, obviously their insurance will cover you. The calculation you need to make is this: say the car is worth $4k, and it's costing you $600 a year to keep comprehensive/collision coverage on it. If you even rear-end someone pretty hard, you'll be over the limit for it to be totaled, and you'll get a check for $4k, less your deductible ($500-$1000 I assume). How long do you have to go without such an accident before it becomes a better deal to not spend that yearly cost? And how helpful is the ~$3k payout you would get going to be? What are the odds that you will get in an accident - do you drive much, or very far?

I have a '98 Integra with 150k miles on it, which I love to death, but I removed comp/collision coverage from it last year because it was costing me something like $800+ per year, and the car is only worth about $5k now. I drive it in town once a week, plus on the occasional camping trip. Not worth the cost. If it gets totaled I'll be disappointed, but I don't even need a car right now.
posted by autojack at 12:05 PM on January 22 [1 favorite]

i just want to reiterate what banannafish said- and from personal experience i can tell you it's wicked hard to prove that someone else is at fault, even if it's pretty obvious at the time. so to protect yourself from the douche in the suv that decides to back up into your car (...just to pick a random example which may or may not have happened to me) either have collision insurance or a couple thousand dollars on hand.
posted by genmonster at 12:21 PM on January 22

Thanks! Autojack's analysis makes sense for me given my numbers and situation. I live in San Francisco ($expensive), so full coverage with $1,000 deductible is more than $1,000 per year. So I'm paying $1,000 for the small-ish chance of needing $3,000. And I can live without a car.
posted by ClaudiaCenter at 12:25 PM on January 22

Well, my wife and I share an old Jeep with more than 100,000 miles on it, and I keep the full coverage because I'd rather not have to spend our meager savings on buying a new car if this one gets wrecked.

When I was younger and poorer, I would often go with just liability, or no insurance at all, but I'd never do that with a car that cost more than $1,000.

If you scrounged up a few grand to buy the Jetta -- which could be good for another 100k miles -- I'd protect your investment, regardless of its advancing age. You don't want to end up like this mefite!
posted by M.C. Lo-Carb! at 12:27 PM on January 22

Actually, correction, I'm paying about $600 (the extra amount for full coverage -- liability is about $400) for the chance of getting $3,000 (the blue book minus deductible). But I still end up thinking it's not worth it.
posted by ClaudiaCenter at 12:35 PM on January 22

Never insure risks that you can afford to handle. Period. There is no exception to this rule. Insurance companies have actuaries that are smarter than you. These actuaries will make it impossible for insurance to have a positive profit to you (regardless of what type of insurance you get). If there was a possibility of a positive profit to you, the insurance company would immediately fold. You can't escape the mathematics of it.

So, the question is - can you afford to put down the money to get a car right here right now? If so, there's no reason to insure it for more than the state minimum. "Protecting your investment" is a ridiculous excuse to lose money on unneeded insurance.
posted by saeculorum at 12:40 PM on January 22 [3 favorites]

These are all really helpful answers. I can live without the car, and it's not worth more than a few thousand dollars, so I think I'm good. I'll be putting the extra money into my servicing and upkeep.
posted by ClaudiaCenter at 12:49 PM on January 22

Obviously, all of the good advice above only applies to collision/comprehensive. The amount of liability insurance you carry is a more personal decision, on which the value of your car has no bearing.
posted by DeucesHigh at 12:52 PM on January 22

These actuaries will make it impossible for insurance to have a positive profit to you

That is a little misleading; it's like saying it's impossible to win at roulette!

Your conclusion that roulette is not a good financial strategy is correct though.
posted by aubilenon at 1:02 PM on January 22

yeah i have to take issue with this statement "Never insure risks that you can afford to handle".
Lets take my wife's wedding ring. I can afford to replace if I had to. But, the cost of insuring it annually is about $125. On an overall basis (all the people insuring rings), this may be to the insurer's benefit. But, for me, the risk of a big loss coupled with the low cost, makes it worth it to insure, just based on the risk.
The comparison to roulette seems like the opposite of this: I can take the risk of losing it or go the safe route of insuring it. In short I view this type of insurance as a hedge.
posted by alkupe at 1:18 PM on January 22

Good gravy- it's $600 MORE to add comprehensive? That seems excessive, and not worth it. Put the extra money straight into a separate account, every month. Use it for upkeep, and when the time comes to replace the car, you'll have a nice pile of cash to use for that purpose. (You can stop depositing the money when the pile is larger than what you know you will want to spend on a new car. Then, profit!)

Never insure risks that you can afford to handle. Period. There is no exception to this rule.

Agreed. Although it depends on your definition of "afford". If I have a house worth $200,000, and I also have $200,000 in the bank, by that definition, I CAN afford the risk. However, do I WANT to deplete my savings if lightning strikes my house? Especially considering the low cost of that insurance? Probably not.

Insurance companies have actuaries that are smarter than you. These actuaries will make it impossible for insurance to have a positive profit to you (regardless of what type of insurance you get). If there was a possibility of a positive profit to you, the insurance company would immediately fold. You can't escape the mathematics of it.

Not necessarily. The actuaries make sure the population of things they insure will be profitable. For individuals in that population, some will make out, others will lose. It's just risk sharing with the insurance company taking their cut.

And, even if you don't ever make a claim, the peace of mind from having insurance is worth something. That's part of what you pay for.
posted by gjc at 1:22 PM on January 22

Take a look at this question, posted on MetaFilter just the other day. There is a chance, albeit a small one, that your car could be destroyed through no fault of your own, and with no other person's insurance to claim against.

If you had comprehensive coverage, your insurance company would pay you the value of the car, minus your deductible. So to replace the car, you'd need only enough cash to cover the deductible. If you had liability only insurance, your insurance company would pay you $0. So you'd need enough cash to cover the entire value of the car.

So the question I'd ask myself is: Could I buy an acceptable replacement car with the money I have in the bank right now? If so, liability only insurance may be enough; if not, comprehensive insurance might be a better choice.
posted by Mike1024 at 1:27 PM on January 22

Never insure risks that you can afford to handle. Period.

This is right on the money. The priciple is self-insurance - you wear losses that you can afford because this is always going to be cheaper than supporting the overheads of an insurance company and the profits they are taking.

In a past life I had a job lodging customer's insurance claims and the number of people who have low excesses (deductibles) and claim on little items is depressing after a while. I had one guy call up to claim on a $80 shirt that was 'storm-damaged' - strong winds ripped it on the clothes line - with a $50 excess i.e. $30 back to him. We required him to get a store to give him a damage report on the shirt and a quote for replacement. This type of thing is just insane. People seem to have the attitude - "Hey I've got insurance I should use it and get some money back".

So sorry, derailing a bit there but yes, always better to under-insure as much as you can afford to the point of not insuring at all if you can completely wear the loss.
posted by Sitegeist at 9:17 PM on January 22