Should I carry full coverage on my car?
One of the top questions I get asked by my clients is whether or not they should carry full coverage on their car. This is a difficult question to answer because I’m not the one who will have to incur the costs if something happens to it. I start by asking them a few questions about the mileage and condition of the car, then explain that their insurance will not pay more to fix it than the cost to replace it.
The best way to determine how much an insurance company will pay for your car if it is in an accident is to shop the same year, make and model with similar miles on CarSoup.com. Usually the cars you find on car soup will be for sale by a dealer. If it is at a dealer, they will typically recondition the car before selling it. Meaning there won’t be any dings, dents, scratches, no rips or tears on the interior, it won’t need tires, brakes or any other maintenance. Take the price the dealer has it listed for, then reduce that price for those reconditioning items and maintenance you car needs. You will also have to take into consideration your deductible. So, if you come to a price of $2000 after the maintenance items and you have a $500 deductible, the insurance company will only give you $1500 in this case.
The other thing to consider is that if you have liability only on your car, your insurance company won’t pay anything if the accident is your fault. However, if the accident is deemed someone elses fault, their insurance company will pay for the damages to your car no matter what kind of coverage you have. This is still subject to the value of the car as no insurance company will pay more than the car is worth.
Now, if you have a loan on the car, you don’t have a choice, you are required to keep full coverage until the loan is paid off.
Once you determine the value of the car, you have to decide if it’s worth taking that amount of risk on yourself. Let’s say you find the car to be valued at $5000, you have a $500 deductible and the full coverage costs you about $30 per month. That’s a pretty easy decision to keep the full coverage on the car. Now, if the vehicle has a $2000 value with a $500 deductible and it’s costing $30 per month, well that’s a much easier decision to make. Sometimes it gets easier, for example if you have a 16 year son driving a car and the full coverage is costing $100 per month… The decision becomes a “no brainer”.
I hope your finding my blog educational. I’m never too busy to be a resource for you, your family or your friends for any questions regarding insurance. Call or email if I can help!
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