I recently heard someone on television say it was a good idea to cancel the collision and comprehensive portions of your auto insurance coverage if you want to save money. What do you think about this? My husband and I are trying to follow your plan. We have $1,000 in our emergency fund, and we drive a couple of old, used cars. Would this idea work for us?
Obviously youíll save money if youíre not paying out as much to the insurance
company. But I donít think dropping that coverage is a good idea. Letís say you donít have much money saved up, and then you total your car. Howíre you going to get to work or to the grocery store? It would leave you in a bad situation, wouldnít it?
If youíre driving a couple of beaters, the insurance doesnít cost that much. Cheap cars mean cheap insurance. Self-insuring is a good idea sometimes with some things, but I donít believe in it when youíre talking about your cars and youíre broke! In my case, Iíve got enough money to just write a check and buy another car if something happens to mine. But when I added up what the car costs versus what they charge me for insurance, it looks like a decent deal to me. Iím just not willing to take the risk with that much money.
The purpose of insurance is to protect you from risks that you are unwilling or unable to take yourself. Thatís why I still have full coverage on my car.
The cost benefit analysis told me it was a good idea. I suggest you keep it, too!