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Dump Your Clunker's Car Insurance

Older cars still need car insurance. In many cases, we have had these older vehicles ever since we bought them new. It is hard to know when to make adjustments to car insurance as a car ages. It's actually much easier to know the right time when it is someone else's car you're talking about than when it's yours. Getting used to having a vehicle around and even getting attached to it can cloud our judgment and get in the way of our logic based decision making capabilities in these areas. But at some point you need to step back and be able to say it is time to cut back on that extra coverage and carry liability only. Full coverage does not make any financial sense whatsoever for old clunkers.

Collision and Comprehensive are Expensive

Collision and comprehensive insurance for automobiles make up a big part of a full coverage auto insurance package of protection. They offer tremendously useful protection for newer cars and for vehicles being financed. But just as quickly as a car depreciates, the usefulness of comprehensive and collision insurance depreciates. In a lot of cases, cars that are four and five years old should not have collision and comprehensive on them any longer, based on the potential return on investment against the cost. The trouble is that premiums for these areas of coverage never fall as fast as the value of the car being insured. About half of the overall premium for full coverage goes to collision and comprehensive.

Comprehensive and collision insurance are very expensive. Yet many drivers are very hesitant to drop them from their policies collision and comprehensive pay for the damage you do to your own vehicle when you cause an accident, and the property losses that occur in non accident situations. These two areas of coverage combine with liability insurance to form a basic full coverage policy. The three of them are the three main areas of protection we can buy as drivers, with liability paying for damages you do to other people's cars and bodily injuries they sustain when you cause an accident.

Save Money on Your Coverage

Although drivers will always need liability insurance (and most likely more than just the legal minimum), dropping comprehensive and collision insurance is a good way to get your rates down under control and save some money on your insurance. These parts of a policy just lose their usefulness in leaps and bounds as a car gets older. Their maximum value is based upon the insurer's assessment of the actual cash value of the vehicle in question at any given time. So as time goes by, you are paying for less and less protection month after month. But the same is not true of liability protection, which holds its value because it has nothing to do with the covered car at all.

There are a few different things a wise consumer might consider doing with the financial windfall realized from dropping collision and comprehensive insurance on your car. On one hand, you could reinvest some of it into your policy. For example, you could beef up your liability insurance now that you have the money freed up to do so. But another option might make more sense to a lot of people. Taking the money you would be spending on collision and comprehensive and setting it aside for the next new vehicle purchase is smart for a number of reasons.

First of all, it lowers the amount of money you will have to finance on that next vehicle estimate, whatever it is and whenever you do buy it. Second, it allows your monthly payment on that future car to be smaller. This frees up future cash flow. And third, it helps you to get above water sooner with that hypothetical new car. Buying cars with little or no money down is tough because it requires high payments, along with mandatory collision and comprehensive insurance required by the lien holder in most cases. You'll be saving money in at least three different ways by simply setting the money aside that you are already used to spending and designating it for this special future use.

Knock Down that Insurance Bill

If your car really is a clunker, dropping all that extra coverage is a no brainer. But there are many borderline cases where the answer isn't quite so clear. If you're not quite ready to drop collision and comprehensive yet, think about at least raising the deductibles to free up some cash flow at least. Driving a clunker is supposed to be cheap. Don't make it more expensive than it has to be. Dump your clunker's car insurance and buy yourself some flexibility and wiggle room in your monthly budget.


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