Gyroscopic Investing

Gang,

How do you guys decide to keep/drop?

An extreme view would be that if you can't afford to get in an accident with your car and buy a new one, you couldn't afford it in the first place and shouldn't be insuring your way into a car you can't afford.

That's a little harsh, though.  I personally stick with really high deductibles, and don't insure unless it's over $10,000 in FMV.

Liability on the other hand, I would buy more than the required amount in your state.  Medical bills can add up insanely fast, and $50k (my state's minimum) is a pretty pitiful amount, and you're on the hook if you get sued beyond that amount.  I have an umbrella policy over my home/vehicles as well.

I think the best bet is to keep full coverage (unless the car is worth very little) and just increase deductibles.  Increasing deductibles can save a lot of money and still keep you from being car-less if the vehicle were to be totaled in an accident.

Thanks guys! Very helpful.

Two more quick ones:

1) What do you guys consider "high-deductible"? I'm at $1000 now.
2) Do you guys consider "Uninsured Motorist" to be important?

I think mine's $1,500 or $2,000.  $1,000 is pretty good, though.

There's another consideration you should make when buying auto insurance - not just the value of the car you drive:  Do you have enough coverage to pay for someone else's car and medical?

Hypothetical scenario:  Your $1000 beater just plowed into someone's $100K Mercedes, totaling it and sending them to the hospital for $200K worth of bills.  Your $50K insurance pays in full and the person comes after you for the remaining $250K, wins in court, and gets your house plus any accounts that are not protected outside of your 401k.  In a no fault insurance state, it might have not even been your fault at all, they hit you, but because "the other guy's insurance pays" you get sued in court.

So, I think it's reasonable now to have $100K/$300K insurance on almost any car you drive.  If you have a good driving record this shouldn't cost too much.

A high deductible is fine; you surely have enough in temporary savings to cover it.

Another thing to strongly consider is temporary car rental replacement coverage - it's only a few bucks more and gets you a rental car if your vehicle is in the body shop getting repaired from an accident.  I once got hit by someone and didn't have a car for 6 weeks.  Lesson learned - I do not want to be making a car payment and have to pay for a rental as well.

Thanks Storm - Great insight, and easy to understand.