About David Thompson Expertise I can answer questions on homeowners, personal auto, business auto, commercial general liability, commercial property, and most other types of property and casualty subjects.
Experience I've been a licensed agent since 1987 and have been teaching insurance professional education classes since 1991, mostly in Florida.
Organizations I'm on staff at the Florida Association of Insurance Agents in Tallahassee. I am also on on the faculty of the Independent Insurance Agents of America Virtual University.
Education/Credentials Hold the CPCU, AAI, and API designations.
Question I live in PA. Have a 1995 Jetta, 64,00 miles; going to keep it as long as I can. Am I wasting my money carrying full insurance coverage on it? The body is in fair cond., but it runs great & is great on gas. Thanks
Answer The question of whether to drop collision coverage comes up a lot here. The final decision is the customer's, and it will be an individual decision depending on various financial conditions of the person making the decision. What is all comes down to is, “Are you willing to pay XXX amount of dollars in premium in order to possibly get back XXX amount of dollars from the insurance company at a total loss?”
Before you make the decision you need to know the value of your auto. Web sites like www.kbb.com, www.edmunds.com, and www.nada.org can help in determining that figure. In general you're paid the retail value, plus tax, less deductible.
Next you need to know how much money you could come up with in a few days without adversely affecting your financial position. For example, I could write a check for about $5000 today without wiping me out financially. I sure wouldn't like doing it, but I could. Keep in mind too that this figure varies for everyone. I once had a client who insured a one-year old Cadillac valued at over $20,000 and he didn't carry collision coverage because $20,000 to him was “pocket change.” On the other end of the spectrum are folks who couldn't come up with $1000 if they had to.
Finally, look at the premium you pay for collision. I took a look at my policy and I pay about $160 per year for collision on my 1998 Mercury Sable. My car has a “book value” of about $11,000 give or take a thousand or two.
So the question to ask is, “Is it worth $160 a year to me to get back perhaps $10,000 on a total loss?” For me the answer happens to be yes. For others it may be “no.” Plus, I couldn't come up with $12,000 to buy a car without significant financial impact, so I elect to carry collision. Even when I had an older car valued at about $4,000 and was paying about $120 a year for collision I kept the coverage because I saw it as worth the money. Even those with a $2000 car paying $100 a year may see the cost as worthwhile.
So, don't let anyone tell you that it's not worth it to carry collision, because they don't understand your financial condition. Statements such as “drop collision when the car is 10 years old” or “drop collision when the cost of the coverage exceeds 10% of the value of the car” carry no weight since they don't consider your financial position. As I stated, you and only you can decide when it's worth it to carry collision coverage.
I would hope that your own local agent would be a good source of information for you. Have you consulted him/her on this issue? If so, what was the response?
One final thought. Even if you do decide to drop collision coverage I'd always recommend carrying “comprehensive” coverage. This pays for damage caused by such things such as fire, hail, flood, theft, and vandalism. This coverage is very inexpensive in most cases, typically about 20% of the collision premium on most vehicles.
