ok so i just got the rates on my insurance for my car...collission coverage is 1490...my car isnt worth more than 4500 and total insurance for my car is 4500 yearly...do you think it makes sense to cover it for collission, im thinking no, but i dont want to be out of a car if something happens and its my fault

 

A friend bought a $4000 car. He didn't purchase collision coverage because he thought it wasn't worth it. 3 months later someone braked too hard in front of him and he slammed into it, totalling it. He didn't have another $4000 to replace the car, so he bummed rides for a year.

If you have the cash, you can definitely save big bucks on insurance by not buying collision. If you can't afford to total it, I would recommend shopping around different insurance companies for lower rates, increasing your deductible, or learn public transportation .

 

Hey, JettaGT. I'm an insurance Agent so I deal with and advise my clients in situations like this all the time. Foolio pretty much nailed it on the head with his post. Insurance is simply a form or risk management where you face decisions about how much risk you want to transfer to the insurance company, and how much of the risk you retain for yourself. In the auto insurance realm, an individual with high liability limits and low deductibles is an example of someone who is making the decision to transfer most all of the risk and responsibility to the insurance company. On the other end of the spectrum, an individual with liability only coverage and low liability limits is an example of someone making the decision to transfer very little risk and responsibility to the insurance company. In both of these situations, and everywhere in between, there is a direct correlation between the amount you pay and the amount of risk you transfer/retain. In your situation, the most important question for you to answer is whether or not you'd feel comfortable retaining all the risk and responsibility for damage to your vehicle in the case that you're at fault in an accident in exchange for $1,490 in your pocket annually. You could total your vehicle in an at fault accident tomorrow and be without a car...essentially out $4,500. On the other hand, you could remain "at fault" accident free until the day you decide to finally drop collision coverage on the car, and realize an annual savings of $1,490. That's the dilemma.

Bottom Line: YOU need to decide what's makes the most sense for YOU (in terms of finances, peace of mind, risk tolerance level, etc). There's no universal formula for determining when to drop collision coverage as every person and every situation is unique. If you can swing it, go for it. If you can't...don't. Sometimes you just have to make the best decision you can at the time and live with the consequences.

Now that I have taken up your time to tell you something you already knew...I'll be leaving

Nate

 

wait does that mean if you cause $500,000 damage (you total somebody's enzo for example) to somebody else's vehicle, you'd pay that out of pocket too?

 

Not having collision coverage on your car only means that if YOU are at fault in an accident and YOUR vehicle sustains damage, YOU are responsible to cover the damage to YOUR vehicle out of pocket. The $500,000 of damage you cause by totalling the Enzo is paid for by your insurance company up to your policy liability limits. Most people have a liability limit for property damage ("at fault" damage to another vehicle/property) of less than $500,000, however. So if your property damage liability limit is only $100,000 and you cause $500,000 of damage to an Enzo, have fun paying $400,000 out of your pocket

Nate

 

note to self. . . don't tailgate an Enzo.

 

Here's how I'd look at it: If you feel you're a safe driver and within a couple of months, could afford half of your car's value (2-2200 bucks) I'd go for it, and forget collision. Chance it a little, and if you could afford to put half down on another car in 4-6 months time, you'd be in decent shape. But say you total your car in 6 months.. if that would really break you, I'd say go ahead and get the insurance coverage for it. However, one thing to think about- be sure your insurance company considers your car worth 4500. My gf totalled her car and received less than the amount she'd need to get the same car. You don't want to spend 1500 this year, total your $4500 car and then have insurance tell you you're getting 3500 for it..

 

if you hit an enzo and your limits were only 100k in property damage, the company who insures the enzo is not going to be happy trying to get the rest of the money they paid in damages...i doubt a judge would rule in their favor for you to pay $$$out of pocket

 

You're right, the company insuring the Enzo wouldn't be happy. They'd end up paying for the damages to the Enzo even though their insured wasn't at fault under the underinsured/uninsured motorist coverage portion of the Enzo owner's policy. They would then take you to court to try and make up for their loss, unlikely to recover what they paid out...especially any time soon.

 

I wonder if a traditional insurance company, like Geico, would even underwrite an Enzo for that very reason. If I were more bored, I'd request a quote on one from Geico.