Bucky,

That is correct. I beleive that the first post asked about dropping
collision and the rest of the posts above are asking about uninsured
motorists coverage. In the event that one drops collision then it is
logical to add uninsured motorist coverage for property damage (it
typically runs about $10 per month, varying depending on the usual
factors, versus the $200+ per month for collision coverage) and maybe
for bodily injury. Personally I have collision for my wifes car (which
is really nice) and uninsured motorist property damage for my car
(which is worthless...). With this arrangment I do run the risk that a
falling object or a one party accident will cause me bodily harm that
may be excluded by my health insurance, but I drive so little that I am
willing to take that risk.


Gary Brolis
http://www.MechanicsofMoney.com
http://www.MechanicsofMoney.com/blog.php

Bucky wrote:
- quote -

If you or a family member is permanently disabled you will be
profoundly grateful for every penny you can scrape up from whatever
source, so I don't think the fact that 100K won't pay for everything is
a sound reason to not carry uninsured motorist coverage.

I believe you can buy as much uninsured motorist coverage as you want
as long as you have liability limits of the same amount. You are not
limited to 100K or 250K.

Of course its always a good idea to have disability insurance for the
family income earner(s), but that doesn't solve the problem of care
expenses for a disabled spouse or child. Also disability insurance is
very expensive, and many people may in a position where they could
afford uninsured motorist coverage but not disability coverage.

I guess my main point is that in a bad car accident you can have
substantial financial losses that are not covered by health insurance.

Andy

Mechanics of Money Financial BBS wrote:
- quote -

With my insurance, uninsured motorist property damage is only available
if you do not have collision coverage, because collision coverage
covers any collision (regardless of uninsured motorist, fault, or
object).

- quote -

With my insurance, uninsured motorist property damage only covers
damage from other motor vehicles. And you have to identify the the
other driver or owner (so that excludes hit and runs if you don't get
the license plate). I think this is a "cash cow" for auto insurance
companies.

Andy wrote:
- quote -

But doesn't uninsured motorist only cover up to your bodily injury
liability (e.g. $100K or $250K or whatever)? So it's not like it will
provide lifetime expenses. Seems like you should get a good disability
insurance to cover that situation instead?

Bucky wrote:

- quote -

Well, it depends if you want to try to survive on social security
disability if an accident caused by an uninsured motorist leaves you
disabled for a substantial amount of time. I don't know how much
social security disability will pay, but I imagine its not much,
especially if you need special equipment or care.

If a family member, say a child, is permanently disabled in an accident
caused by an uninsured driver you may have lifetime additional expenses
for special care which are not covered by health insurance. Also, in
the case of lifetime special care needs for yourself or a family
member, who knows what your future health insurance coverage will be;
you could lose your job tomorrow, or your employer could reduce
coverage or increase copays, etc.

I think uninsured/underinsured coverage can save you from financial
difficulties in the case of a bad accident even if you have excellent
health coverage.

Andy

It still might be advisable to get uninsured motorist coverage for
property damage (maybe not for bodily injury), as that is typically
very very minimal cost. Motorists still might run into the problem of
a falling object causing damage or running over a racoon (or other
varmit), which will cause damage and not be covered...


Gary Brolis
http://www.mechanicsofmoney.com
http://www.mechanicsofmoney.com/blog.php

spoca2005[at]yahoo.com wrote:
- quote -

I think it's fine. Although $216 collision for a year is really low.
Personally I'd keep it for the first 5 years if it were my car.

- quote -

Why pay for medical $5K to cover your passengers? With the same
reasoning as collision, you expect a serious accident in 1/200 per
year. Then multiply that with how often you carry passengers. Then
multiply that with what % of your passengers do not have their own
health insurance. If $16K was not a devastating loss to you, then $5K
to pay for passenger's medical should not be either.

- quote -

I've heard difference advice on uninsured motorist coverage. If you
have excellent health insurance, and you do not have collision
coverage, is uninsured motorist coverage still necessary?

Andy wrote:
- quote -

I should point out an important caveat on what I said about umbrella
liability policies. While it is true that personal injury attorneys do
not like to mess around with going after people's assets, in a
situation where an injured party was severely disabled and needed
special and expensive care for the rest of their lives the injured
party would have no choice but to go after the defendent's personal
assets and their attorney would be ethically obligated to pursue this,
even if it wasn't especially profitable for them. So, an umbrella
policy could indeed come in handy in rare circumstances.

I asked a friend of mine who has been in the personal injury business
on both the plaintiff and defense side for 14 years if he has ever
heard of a PI plaintiff going after a defendent's personal assets and
he said he couldn't remember ever hearing of such a thing.

Andy

spoca2005[at]yahoo.com wrote:
- quote -

I think your analysis is entirely correct regarding the collision
insurance. The insurance company is, by definition, charging more than
the expected losses, so if you could live forever and drive your car
forever you would expect that in the long run you would save money by
not paying for collision insurance. As a practical matter, however,
the reality is that you will either save a lot of money by not having
collision coverage or lose a lot of money by not having collision
coverage. The choice is kind of like the choice of whether or not to
play blackjack at a casino. The casino always wins on average, but
some individuals beat the casino and some lose to it.

I personally would not spend any money on an umbrella liability policy
in your circumstances. I worked for 6 years at a law firm that did a
lot of insurance defence cases, and my conclusion from that experience
was that having high liability insurance coverage attracts lawsuits and
doesn't really do much to protect assets. The first thing that a
personal injury attorney wants to know about a case is who has how much
insurance. This is because without insurance personal injury cases
just aren't profitable for an attorney. It is a lot of boring drudge
work to track down someone's real estate and personal property and
auction them, find their bank accounts and attach them, and garnish
their wages. It just doesn't make business sense for an attorney to
spend his time on these time consuming tasks when he could be putting
his efforts into pursuing claims against insurance companies who will
mail him a big check once he convinces them he has a good case. So, I
personally only get enough liability insurance so that in the event
that something terrible happens both the plaintiff and his attorney
will get reasonably big checks and go away content.

Andy

<<Current value is probably 16K>
No, KBB.COM shows the wholesale value to be about 12K. While it well
might cost you 16K to replace it, the insurance will probably only pay
the wholesale value.

John Cowart

What are good guidelines for deciding when to get rid of collision
coverage on any automobile? If I am financially well-off to bear the
loss of the whole car, doesn't it make sense to not have collision
coverage, even for a new (or relatively new) car?

Even with the highest deductible ($500) that Mercury offers, the cost
of collision is 216/year.

I want to keep the comprehensive insurance, since the premium is low,
and, at least on California highways, one needs to replace the front
windshield about once every 3-5 years due to so many flying rocks.

=============================================
If you are quantitatively inclined, read below.

Two cars, two drivers, no children:

Car 1. 1996 Honda civic, 170K miles, in good condition. It accumulated
miles in the first 8 years, when it was the primary car. Now it gets
less than 4K/year, all non-commute miles.

Car 2. 2004 Honda CRV, 30Kmiles, in excellent condition. This one is
drive about 15K/year; about 6K commute miles; rest around town and long
drives. Current value is probably 16K.

Insurance limits are:
Liability, uninsured & under insured: 250K / 500K / 100K
Medical: 5K (basically for occasional passengers; we have excellent
health ins.)
Comprehensive: CRV only, with $25 deductible
Collision: CRV only, $500 deductible.
No comp or collision on the civic.

Both cars are paid for (well, we bought them with cash in the first
place). We have no debts other than mortgage, and we are fortunate
enough to manage all our monthly expenses, including mortgage, with 25%
of gross income (40% of take-home). The remaining 60% of the take-home
goes into investments & savings. We also have a good emergency fund,
and can afford to buy another car, if the CRV "disappeared tomorrow".

So, I am thinking of dropping the collision coverage from CRV
(incremental cost of collision coverage is $216/year). My reasoning is
as follows (I work on building models for insurance industry, but do
not have data on auto line of business)

(a) The expected loss per year: The chance of wrecking the car
ourselves, is probably 1-in-200 to 1-in-500; so the expected loss is
about $80 to $120. The premium is $216/year (incremental premium for
collision coverage). The standard deviation of the expected loss is
about $1000.

(b) premium/limit (max amount that could be recovered) = about 1.4%,
which feels like a high premium rate.

(c) Insurance should be only for the losses I can not bear. In this
case, self-insuring seems like a better deal, no?

I feel like: (a) cancel the collision insurance; and (b) probably use
2/3 of the collision premium to buy an umbrella liability policy to 1
million. Wife thinks we should keep the collision -- she is also
analytical type, but can not offer any rationale in this case other
than "The car is just 2 years old, so shouldn't we keep it?"