Car Insurance - Is Liability Only Coverage like Living on the Edge?
I was late for work today, I can’t blame it on my alarm or on traffic, but on a thief because…
…my car was stolen!
Can you believe that? One minute I had a reliable car – albeit, not as easy on the eyes as it used to be, but it never let us down! I can’t describe the empty feeling that came over me when I realized our car was gone and finding it was beyond my control. Being a frugal person, I have gotten used to trying to do everything on my own, really focusing on saving by taking things into my own hands. Well, this is one situation that is beyond my control. Now I can only hope our combined tax dollars are put to good use and our car will return home.
You may be asking yourself, what does this have to do with making wise financial decisions? It’s a good question, and my answer has consumed my thoughts for the majority of the day. Car insurance, you legally have to have it and with certain state minimums, the floor is set, however, insurance companies allow us to choose options which raise our premiums, as well as our coverage. Now, having said that, the question that has bothered me all day is, have I taken frugality to the max by insuring our car with only liability, which gives us no recourse now that it has been stolen? I can now say with confidence, that I believe I have made the correct decision, even know my car is lost (sounds better).
Liability vs. Comprehensive Car Insurance
In simple terms, liability insurance covers damage to other cars in the event you cause an accident. Comprehensive insurance also covers damage to other cars in the event you cause an accident, as well as your own car. Comprehensive also covers cost in case your car is vandalized, stolen, or even met with deer. Typically, if you do not own your car and are making payments to a lender, the lender will require you to be insured with Comprehensive; after all they are invested too. After your car is paid off, you can then move to having only liability which can reduce your monthly insurance premiums a great deal.
How on earth can I be confident that having only liability was the right choice considering our car lost its way? Well, our car is, or I should say was, a 1995 Dodge Neon. It was originally my wife’s car before we got married, and she has had it since the 9th grade! The neon had a total of about 160K miles and carried a estimated market value around $1,000. Because Comprehensive insurance would have raised our premiums to the point where in a couple years we would have made more payments to our insurance company for the extra comprehensive coverage than our car was worth, combined with a $500 deductible, really made liability the best decision.
The lesson that can be learned from all of this is to consider re-examining your car insurance. Are you paying too much for cars that aren’t worth the coverage? Or perhaps you have only liability on a vehicle that deserves full coverage. We suggest doing the math to determine what is the most financially beneficial to you. As bad as my day has been, I’m glad I did this cost-benefit-analysis before becoming insured. Have you done your due diligence?
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Comments
@Mr Debtbeater: I hate to rib Frank about this, especially since it was only afew days ago and he has no vehicle, but I suggested that it may have been just that the thief got te door open BEFORE he realized it was a neon. Then they thought oh what the heck, I need a ride. The nice thing is that the gas gauge doesnt work and just says empty. Sorry Frank I had to! 
Dang dude, who the heck would steal a ‘95 neon? That’s pretty desperate. I find myself forgetting to lock my car quite a bit because it’s an old ’90s car as well. Guess I better think twice about keeping that up!