The Insurance My Car Needs, The Insurance My Car Deserves

November 9, 2018 7:52 AM

I have a 2007 Toyota Prius. Is it still financially worthwhile for me to have comprehensive insurance for it?

My insurance premium is about $1300 for a year. That, to me, seems ridiculous. I really would like to be paying less on car insurance, so I've been considering dropping the comprehensive coverage on it.... Since the car is so old at this point, it seems like maybe the comprehensive coverage isn't actually worthwhile anymore. Maybe? I don't really understand the financial implications of my car's age, and how to determine when or how comprehensive coverage is worth it.

Is comprehensive coverage always a good thing to have on your car? Or is there a point, given your car's age, when it is no longer worthwhile? Or could I be completely backwards, and is comprehensive coverage even more valuable, the older the car gets?

Please help me understand what's in my own financial best interest. Thanks!

posted by meese to Work & Money (11 answers total)

At this point I'm assuming your car is paid off. So at this point, any "total" claim for this car (which could be suprisingly small, given the age) is pretty much going to go to finding a replacement car.
If you feel like you're a good enough driver that you're not going to total your car yourself, you are still taking the risk that someone without insurance hits you and does it for you.

The question is if you feel like you have the funds to put up for a replacement car yourself or if you'd need the insurance claim.
posted by LizBoBiz at 7:57 AM on November 9, 2018 [1 favorite]

I think there are a bunch of considerations that come into play here, most of which are only tangentially related to the actual replacement cost of the car.

First, have you shopped around for insurance and priced out plans with/without comprehensive? On my similarly-old car, my ~$1000 insurance bill is like $700 worth of liability/etc. and only $300 worth of comprehensive. So make sure you know how much money dropping comprehensive would actually save you.

Secondly, what would you do if your car were totalled (flooded, crushed under a falling tree, stolen, whatever)? Do you need your car every day to get to work/school/whatever or is it more of a luxury item that you use on weekends and for errands and you could go without it for a little while? Do you have money in the bank to buy a new car? Do you have time to shop around for a good deal?

We keep comprehensive insurance on our old car basically because we really love the car and would be sad if something happened to it and getting some money would make us a little less sad and make it easy to replace the car with something similar. I didn't keep comprehensive insurance on our previous car (which was only worth a little less than our current car), even though the financials were very similar. For me it's basically an emotional decision rather than a financial one!
posted by mskyle at 8:05 AM on November 9, 2018

Seconding shopping around to see what you should be paying. As a frame of reference, I pay roughly half of what you do for insurance on a $30k new car.

As to whether it's continuing to keep comprehensive on your current car, I didn't when I had a car that old but I also have a lot of savings and credit so replacing it had I totalled it wouldn't have been financially devastating. And I've also never caused an accident and have only been hit once in over two decades of driving. To me, it was more useful economically to put that extra money into saving for a down payment for when it wore out.
posted by Candleman at 8:19 AM on November 9, 2018

Comprehensive and Collision are different coverages. We don't have collision on our 15 year old car, but we do have comprehensive. Comprehensive covers you if a tree falls on your car; I want that. Collision covers your car if you hit something and it's your fault (generally) - we initially chose not to have this because we lived in Chicago and I told Mr. Meat that if he wrecked the car he'd have to take the bus. Now we have savings to cover it and collision isn't worth it for us.
posted by Ms Vegetable at 8:22 AM on November 9, 2018

A general rule-of-thumb about insurance is that you should only purchase coverage for losses that would be catastrophic to you financially. So if you can replace your car from your own funds and it's not a big deal for you - financially and emotionally, then maybe drop the comp & collision. When you buy insurance, you are paying more than the cost of loss * probability of loss, but what you are paying for is peace of mind. You may also appreciate having the coverage on a rental car if such is covered by your policy and not your credit card.

A lot of your insurance bill may be liability coverage, and that may depend on your zip-code.
posted by everythings_interrelated at 8:35 AM on November 9, 2018 [1 favorite]

If you are going to drop comprehensive, consider adding uninsured motorist coverage. It's usually relatively inexpensive.
posted by sacrifix at 9:12 AM on November 9, 2018 [2 favorites]

(first, a terminology note - collision insurance covers the cost of repairs from an automotive collision that is at your fault and comprehensive insurance covers the cost of repairs from any non-collision damage to your car [ie, hail, theft, etc]. You can generally buy collision without comprehensive, but not usually the other way around).

Please help me understand what's in my own financial best interest.

The most important principle is to insure things you can't afford to replace or risks you can't afford to incur.

Ask yourself, what would happen if your car was destroyed by a massive hail storm tomorrow? If the answer is, "I'd buy a new car from my savings with no problem", you should not have comprehensive insurance. If the answer is, "I'd buy a new car from my savings, but that would wipe out my savings", you may consider comprehensive insurance. If the answer is, "I wouldn't have any way of replacing the car and I wouldn't be able to get to work any more", you definitely should consider comprehensive insurance.

There's no general rule about whether insurance is a good idea or not. Insurance will always be more expensive than covering a risk from your savings - the insurance company not only has to pay for the risk, but also has to pay all their employees and have a profit in addition. However, if you're not able to cover a particular risk, then insurance is your way out.

As a personal example, I don't have collision or comprehensive on my 2009 Hyundai Sonata. If the car was destroyed tomorrow, I would simply go to a car dealership and buy a new car. If you can't do that easily, then you probably shouldn't have the same approach to insurance that I do.
posted by saeculorum at 9:12 AM on November 9, 2018 [6 favorites]

One rule of thumb I read was to drop the coverage once the premium reached 10% of the possible payout for the car. So if you think your car is worth $3000 and the deductible is $500, the possible payout is $2500. It makes sense to drop the coverage once the premium for that portion of your coverage is $250 or more.
posted by crazycanuck at 9:15 AM on November 9, 2018

I'll also note that comprehensive insurance is usually relatively cheap - cars get vandalized/stolen much less frequently than damaged in collisions. You should probably consider removing collision and comprehensive to save significant money rather than just comprehensive.
posted by saeculorum at 9:19 AM on November 9, 2018

Another consideration is that deer strikes are covered by comprehensive, not collision. If you live in a deer-infested area keep the comprehensive.
posted by leaper at 9:27 AM on November 9, 2018 [2 favorites]

You could also take the difference in premium and save that. That way, if you were to suffer the now uninsured event you have a little something towards the cost. And if you don’t you have savings, which is never a bad thing.
posted by koahiatamadl at 10:08 AM on November 9, 2018