Comprehensive & Collision on 14 yr old car?

[trippypea]

This past winter, my teen daughter was added to our auto insurance and we bought her a car. The car is a 2005 Chevy Aveo and it has about 100,000 miles on it. We paid $3000 + tax/fees. The Kelly Blue Book value is less than that, but that's what they were going for in our area. So for insurance purposes in the event she was in an accident, I doubt the insurance company would base their calculations on $3000, and a safer bet would be $2500.

When we added her to our insurance and she was driving our car, it pushed it up about $100/mo. Adding a 2nd car to our policy has driven it up another $140/mo on top of THAT, so I'm looking for ways to reduce the cost.

Right now I have comprehensive and collision on it. It costs $13.25/mo for comprehensive with a $100 deductible. Collision is $39.40/mo with a $750 deductible. Based on these numbers, does it make any sense to have comprehensive and collision on a car this old and worth only roughly $2500? How much damage would it take for the insurance company to total it out?

[Deleted]

I dropped comprehensive and collision on two of my three vehicles when my teen started driving.  They're 14 and 22 years old.  Worth combined maybe 4K.  I think I'm going to add comprehensive back on though, because we have near misses with deer almost every night. 

As for whether or not it's a good idea to drop it, I think the question is, how big of a financial hardship would it be if it were totaled?  It's all about risk tolerance.  For me, right around the 3K value I start getting uncomfortable with it not having full coverage. 

[justme]

It's all in your risk assessment. After I graduated college my parents signed over my car to me. I think it was 12 years old at the time, and probably around 150k miles. I got everything. But I had just started a job so I definitely didn't have enough money to pay for a new one and I needed a car. 6 months into my new job my car got totaled (which is a lot easier to happen with older ones and it's often still drivable when they total it - it was the bumper, front panel, headlight, and the hood was bent a little). But after my $250 deductible I walked away with almost $3k which was a great down payment on a new car that made the payments a good amount for me. FWIW they gave me several hundred dollars more valuation over KBB. The only upgrades I had was a better stereo (but it was like 7 years old) and possibly relatively new tires. My guess is they use something other the KBB, or the add taxes to it, or I dunno.

But for me it worked out - $500 of insurance bought me almost $3k towards my next car. So for you I'd ask 1) if the car was undrivable would you be getting your kid another car relatively soon and 2) if you would get them a replacement car can you afford to pay for a new one without insurance $. 

[swamp]

Why would you carry collision on a $2,500 car?  

[Deleted]

Feb 15, 2019 10:35:00 GMT -5 swamp said:

Why would you carry collision on a $2,500 car?  

If they're not worth much they're a lot cheaper to insure, so it can be worthwhile if $2500 is a lot of money to you.  If I didn't have a teen driver in the house, I'd still have it on my older van, because I wasn't paying much for it...like $16/month.  I wouldn't at the price she is paying though.  Teen drivers jack the rates way up.

[NomoreDramaQ1015]

It's all about risk tolerance for a car worth $2500 I would not bother with it.   Take the money you'd be paying and stick it in a savings account.  Then you have the funds available to repair or will have a start on buying a new vehicle when this one is ready to retire.

[andi9899]

I would drop it personally. $2,500 is a lot for me. My kid would just have to figure something else out if they wrecked the car. That or there would be a lot of car sharing with us. Why not take the $50 or $60/month and put it in a new car fund?

[The Walk of the Penguin Mich]

I think it would depend upon what it cost.  Keeping full coverage on my 13 year Mazda only cost me $50/ year more than liability only, so I kept it on.  I got  hit by an uninsured driver, which totaled the car.  I received about $4000, minus the deductible.  It was more than the book price.

[cktc]

I dropped down to liability after around 10 years with my car. The insurance company was really pushy about it the first couple years, but when your car is worth $3k max and declining I just don't see the value. Not that $3k is nothing to me, but at that point I'm already preparing for a new car vs. continuing repairs. Totalling it with a fat policy would be the lucky outcome in it's twilight years, not one I would count on.

[Deleted]

Feb 15, 2019 10:35:00 GMT -5 swamp said:

Why would you carry collision on a $2,500 car?  

Same reason you would on a $50K car.  In case of the loss, you will have money to replace.

Personally, this is an easy ROI calculation.  In OP's case the value of the car is $2,500 with $750 deductible and it costs ~$40/mo.  So if said car is totaled, 2500-750 = 1750/40 = ~43 months = ~3.6 years.  

Now for my car, value of $14,500, $20/mo for collision with $500 ded.  ROI is 14500-500 = 14000/20 = 700 months = ~58 years. 

For the OP, they are way better off than me to NOT buy the insurance, as in 3.6 years they can save the value of the payout (and that is without any investment returns).  For me I would be crazy to go without as it would take me 58 years to break even.

So the OP really needs to decide if in the next 3.6 years they can come up with 1750 any particular day to help their kid replace the car.  If they can, then don't buy the insurance as many people go way longer than 3.6 years between accidents (hell that car is likely to die of mechanical failure as it is an accident).

Finally, don't forget, many people on the roads don't have insurance, so even though your driver might not be at fault, there is some value in having the insurance just so you don't have to deal with trying to sue a deadbeat.  

[alabamagal]

I am a survivor of teen drivers and car insurance, with 3 kids now in their mid 29s (and their own insurance) i would drop it. First off they will total the car with even minor damage, and then you are stuck. I also used a $1000 deductible. At one point with 3 young adults on my insurance (while they were in college) my bill was over $500 a month, so I did everything I could to save money.

I had one time when dropping collision hurt me, but overall savings were worth it. My YDS wrecked his car 3 months after I dropped collision. The collision coverage was $30 a month, but his car was worth $2000 and deductible was $1000. So when he got in the wreck we saved $100 but lost out on the $1000 payout, but when the car was totaled (major frame damage) we got close to $400 from the salvage company, so loss was $500. But overall savings over several years was probably much more than that.

[Opti]

Feb 15, 2019 11:19:12 GMT -5 NomoreDramaQ1015 said:

It's all about risk tolerance for a car worth $2500 I would not bother with it.   Take the money you'd be paying and stick it in a savings account.  Then you have the funds available to repair or will have a start on buying a new vehicle when this one is ready to retire.

I agree its risk assessment or tolerance. A Chevy Aveo is much different than say buying an old car you are trying to restore whose parts are expensive and there might not be many more copies that exist.

[weltschmerz]

I bought a $2,200, 14 year old car last September.
It's in beautiful shape...not a scratch. You can bet I got comprehensive insurance on it. My total insurance on it, including comprehensive, costs $35 a month.

[bookkeeper]

We drive older GMC Yukons.  The comprehensive coverage is 3 x the cost of collision coverage.  Hail storms in the Midwest have really skewed insurance premiums from what I have paid 35 years prior to today.

All in all we still have full coverage on older vehicles.  Doesn't cost much more than liability coverage.  They are all worth $7000ish.  There is a tipping point, I just haven't personally reached it.

[countrygirl2]

Out insurance is pretty cheap so I keep it on hubs and my truck, his is a 2006 but its still worth over $10 to $15k if you can believe that.  But its a Lincoln truck and still looks good and is in good mechanical shape so I think its worth it.  It would still pay to fix it if wrecked and deer here are a big problem. Hubs said drop it, might be $100 savings, I will keep it.

But on a $2500 or $4000 I likely would not carry it. There will come a point, but hope to have him a new one by then.

[Deleted]

One thing to check.  This is ancient history but FWIW.

I dropped Comp and Collision on an older car and specifically asked the agent if that would violate any underwriting rules of the program I had.  No, he said.  When the bill arrived I saved less than the cost of the coverage I dropped.  Why?  Because liability premiums went up.  He told me that by not carrying Comp and Collision I was classified into a higher-risk "tier" and thus my Liability premiums went up.  This made no sense to me;  I'd think that people who had no coverage to repair or replace their car might drive a little more carefully.

But hey, what did I know?  I'd only been in the property-casualty insurance business for 20+ years at that point.  

[resolution]

I discussed this with my husband last night because we are carrying full coverage on our 2004 truck and 2006 car. He was unhappy that we were paying that, since he had thought we just had liability.  I pulled the bills and the collision/comprehensive for the truck is $100 per year and for the car is $170 per year. 

I plan to get a new car soon and am debating dropping the coverage on the truck when I add the new car, but tbh $100 a year doesn't seem too excessive.