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 you'll save money if you're not paying out as much to the insurance company. But I don't think dropping that coverage is a good idea. Let's say you don't have much money saved up, and then you total your car. How're you going to get to work or to the grocery store? It would leave you in a bad situation, wouldn't it?
If you're driving a couple of beaters, the insurance doesn't cost that much. Cheap cars mean cheap insurance. Self-insuring is a good idea sometimes with some things, but I don't believe in it when you're talking about your cars and you're broke! In my case, I've 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. I'm 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. That's 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!
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