Do you really need to pay to insure your car? Maybe not.
If you own a car, a truck or an SUV you’re probably used to writing out checks for car insurance on a regular basis. That’s just one of the many costs of driving, right?
Well guess what? If your car has a few years and a lot of miles on it you can likely save a bundle by canceling the comprehensive and collision coverage on it and keeping just the liability coverage.
Whether this makes sense or not will depend on several variables:
1 - The age of the car and the number of miles showing on the odometer
2 - It’s current actual market value
3 - Your ability to either pay to have the car repaired or to replace it entirely should the need arise
4 - Whether it’s paid off (i.e. you hold the title instead of a bank)
The current market value of any vehicle goes down over time as it ages and the mileage reading on its odometer pile up.
If you keep it long enough there will come a time when the value of your car won’t be high enough to justify continuing to pay comprehensive and collision premiums on it.
Once you reach that point you’ll actually be losing money every time you make an insurance payment even if you end up totaling the car and receiving a check from the insurance company for what it’s worth at the time of the accident.
The insurance company will only pay you what the car is worth at the time an accident occurs, not what you originally paid for it or what it would cost to replace it. While many insurance companies offer replacement coverage, that only applies to brand new vehicles and usually only for the first 1 - 3 years of ownership.
So what should you do with the money that you would otherwise be handing over in insurance premiums?
Well, you can insure yourself by depositing that saved money into a savings account to use solely for auto repairs and/or the purchase of another vehicle.
Keeping that money stashed away will give you some “insurance” money to spend if and when an auto repair or replacement is needed. If you never have to spend it on auto repairs you’ll have a nice down payment for your next vehicle purchase (or maybe your next trip to the Caribbean).
Note: Don’t forget to keep your liability coverage because it’s required by law in all states. Also, make sure you have adequate personal injury coverage of some type. Just sayin’.
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