Expert: Richard L Carranza - 1/20/2005

Question
I will have my 2001 Toyota Echo paid off in 5 months. I am considering dropping my insurance and only getting liability. If I keep my comprehensive/collision insurance, if I wrecked my car would my insurance only pay up to the blue book value of 7k? If it were totalled, would I recieve anything? I am not sure what to do but don't wish to pay anymore insurance that I should. Thanks

Answer
By State law you are required (mandatory is the term used) to maintain a certain level of liability insurance.... you are encouraged to carry more depending on your asset protection situation.

Once your car note/loan is paid off the decision whether to carry 1st Party coverages (Collision and/or Comprehensive) will be up to you.

Your 1st Party coverages will pay up the Actual Cash Value (ACV) or book value of your car (based on year, make, model, equipment, condition and mileage) as determined from different sources (Red Book, N.A.D.A., various data bases, etc).  The insurance industry generally does NOT use the Blue Book as that is primarily used by car sellers/retailers and tends to OVERSTATE the ACV of the car.

I would CAUTION you about dropping either your Collision and/or Comprehensive coverage unless you can afford to kiss $5-7K away if the car is totaled.

If the pricing or cost of these covers (Collision and/or Comprehensive) is the problem I would take a look at HIGHER DEDUCTIBLES as that is one way to keep the covers and reduce the cost for same.

I would recommend that you talk with your insurance agent about your questions and concerns.

Hope and trust that the above answers your question(s) and provides some direction.

Feel free to get back to me with any further questions/needs re this issue.

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Thanks