Expert: Richard Hixenbaugh - 11/13/2009

Question
Hi Richard,

I have an always-garaged top-of-the-line 1999 Honda Accord EX with 24,000 miles in showroom condition (not even a single door dent)which I purchased new in 2000 for $27,300. I am a 7-star driver with the highest insurance rating. However, my insurance went up this year despite all that! The agent told me that it is not worth having full coverage because if the car is totaled, I will get a maximum of the $10,000 Blue Book price, maybe even only $8000!! I love this car and want to keep it. But, thinking I might get only such a paltry amount for my car gives me the chills if it gets in an accident. He also suggested I remove full coverage as the car is 10 years old. But, I will save only $85 a year. What suggestions do you have for me? Selling the car, I might still get only about $15,000 max. It is not an option. Taking off the full coverage doesn't seem worth it, either. Now, if I total it of my own fault, I will suck it up. If someone else hits me, I can sue to get all the money back. :)

Thanks.

Answer
Hi Totally Confused,
(I almost feel like Dear Abby)

All vehicles depreciate in value with the passage of time and use. Most vehicles will lose about 50% to 60% of their value after only 5 years. Your vehicle is now 11 years old. That having been said, Hondas tend to retain their value better than most other vehicles, but they do depreciate.

If your car were involved in an accident and declared a total loss, the insurance company (whether yours or another) would be required to pay the fair market value of the car at the time it was wrecked. So if you could have sold your car for $11,500 just prior to a collision, that is what the insurance company would have to pay.

You stated that the difference in premium for removing the collision coverage is only $85.00 per year. I think that trading a known amount of $85.00 for the possible return of over $10,000.00 is a good and reasonable transfer of risk. There are many circumstances that even though an accident may not be your fault, you would want to place a claim with your own insurance company such as; being hit by an uninsured driver. At any given moment in most states at least 35% of all of the vehicles on the road are not covered by insurance; You could also be hit by someone driving a stolen vehicle or you could even have a large tree limb fall on your car. With all of these things in mind, I would suggest that you keep the full coverage on the car.

One item to consider would be if you carry low deductibles, you could consider increasing your deductible. That would provide some lowering of the premium, while still providing coverage for the bulk of the loss.

I hope this helps
Richard Hixenbaugh