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Ev of Dropping Auto Collision Insurance

Bart HansonBart Hanson Posts: 6,115Administrator, LeadPro
edited September 2016 in Low Content Forum
I have a 2011 Infiniti M37 with about 48k miles on it. Kelly Blue Book Value is $18k, I got it new and I own it out right.

The collision portion of my insurance with a $1000 deductible is $1100 per year (I will always keep the comprehensive). In CA if you are at fault in an accident your own insurance or the other party's insurance does not cover property damage unless you have collision insurance. More importantly if you are hit by an uninsured motorist you are only covered up to $3500 in property damage if it is the other party's fault.

I have one at fault accident in 2003 for about $9000 worth of damage and literally the day after I got my car out of the body shop I was hit by an uninsured motorist in a hit and run for damage of $4000.

I can afford to buy a new car in cash if my car is totaled.

Thoughts on me dropping Collision insurance? I also consider myself a pretty conservative driver that does not take risks and or drives dangerously.

I think that we can all agree that almost every type of insurance is -EV (perhaps with exception of Health insurance due to the rigged nature of pre-negotiated prices of insurance rates vs cash rates for medical care).

I did a google search and most resources seem way to conservative about dropping collision coverage. I imagine this has to do with the fact that most people don't have proper "rainy day funds" and generally mismanage their personal finances. Also the average person doesn't think about equity in the way that we do as poker players.

Bart
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Comments

  • workinghardworkinghard Posts: 1,573Subscriber
    How many miles a year do you drive? Obviously, the more you drive, the more you should keep your collision insurance. If you didn't live in LA, then perhaps drop it. but honestly, those guys are some of the stupidest drivers I've encountered. I think I would feel a lot more nervous without that coverage. And BTW, studies show that something like 85% of the driving population rate themselves as being in the top 5% of safe drivers. Just saying.
  • Bart HansonBart Hanson Posts: 6,115Administrator, LeadPro
    edited September 2016
    How many miles a year do you drive? Obviously, the more you drive, the more you should keep your collision insurance. If you didn't live in LA, then perhaps drop it. but honestly, those guys are some of the stupidest drivers I've encountered. I think I would feel a lot more nervous without that coverage. And BTW, studies show that something like 85% of the driving population rate themselves as being in the top 5% of safe drivers. Just saying.

    8k miles a year. Seems like that would be the opposite re driving miles as it devalues your car. Its $550 per 6 months and gets readjusted every 6 months.
  • chilidogchilidog Posts: 2,427Subscriber
    He bought his 2011 car new and he now has 48k miles on it. #mathForPokerPlayers
    Thanked by 1squishmytomato
  • chilidogchilidog Posts: 2,427Subscriber
    Btw: i bought my car new in February 2015 and I have 33k miles on it.
  • Bart HansonBart Hanson Posts: 6,115Administrator, LeadPro
    chilidog wrote: »
    He bought his 2011 car new and he now has 48k miles on it. #mathForPokerPlayers

    Bought my car in july 2010 hence the 2011 model!!
  • JKHJKH Posts: 835Subscriber
    edited September 2016
    sounds plus ev too me but I would be most worried about the downside risk, insurance companies exist b/c they make money.... I think if u could afford the worst case scenario you would be fine

    Overall I think it is plus ev if 1000 people did it but b/c of the risk of ruin if the perfect storm scenario occurred I would personally not get rid of insurance.
    It's kinda like if u could flip a coin with a 60% chance of winning (a massive ev edge) but had too put 70% or some huge amount of your net worth on it would you do it?

    I would put 2% of my net worth on it over and over again but 1 time 70% ......I don't think I could do it
  • Bart HansonBart Hanson Posts: 6,115Administrator, LeadPro
    edited September 2016
    JKH wrote: »
    sounds plus ev too me but I would be most worried about the downside risk, insurance companies exist b/c they make money.... I think if u could afford the worst case scenario you would be fine

    Overall I think it is plus ev if 1000 people did it but b/c of the risk of ruin if the perfect storm scenario occurred I would personally not get rid of insurance.
    It's kinda like if u could flip a coin with a 60% chance of winning (a massive ev edge) but had too put 70% or some huge amount of your net worth on it would you do it?

    I would put 2% of my net worth on it over and over again but 1 time 70% ......I don't think I could do it

    Remember this is collision insurance. The worst case scenario is me driving into a tree for a total loss (or 100% at fault accident). Liability coverage takes care of the other party.. I'm just out the value of what would be the payout from my insurance company for a total loss (about $18k).
  • JKHJKH Posts: 835Subscriber
    sounds like a reasonable downside
  • chilidogchilidog Posts: 2,427Subscriber
    so basically the concept is: if you are less likely than 1/31 to total your car in any given year , than you should drop collision coverage.

    $1100/$35000 (replacement cost of car) = 3.1%

    Sounds like a reasonable proposition.
  • Bart HansonBart Hanson Posts: 6,115Administrator, LeadPro
    chilidog wrote: »
    so basically the concept is: if you are less likely than 1/31 to total your car in any given year , than you should drop collision coverage.

    $1100/$35000 (replacement cost of car) = 3.1%

    Sounds like a reasonable proposition.

    Actually the insurance pays you the value of the car, (in my case $18k)- the deuctible (in my case $1000).
  • BananaStandBananaStand Posts: 1,455Troll
    edited September 2016
    Have you talked to your insurance company? One thing I would ask is what hurdles are there to getting insurance again someday when you win the WSOP and buy a ferrari. I know sometimes if there is a gap in your insurance coverage, they jack up the rates when you try to come back. Definitely get the details on that.

    Insurance is like playing in the world's most F'd up casino. You're making a bet that you're gonna wreck your car, they're betting that you won't, and you kinda hope they win. The insurance companies have enough data on their side to know that their bets are always +EV, and yours are always -EV.

    One thing you can do to diminish their edge is to manipulate your deductible. Your premium should be peanuts if you have a huge deductible.

    Also, shop around, or don't and say you did. Call your insurance company and say "XYZ insurance company is giving me the same policy for $950". See what happens.
  • FreeLunchFreeLunch Posts: 1,311Pro
    Why would you keep comprehensive - thats the most -ev part of auto insurance.
  • ArenzanoArenzano Posts: 1,464Subscriber
    If you own your car outright, drive few miles, and aren't worried about repairs on a damaged vehicle, then reducing your optional coverages makes sense.

    Insurance is a racket and the best wat to legally steal money from the masses.

    BTW, who are you insured through?
  • TastesLikeBurningTastesLikeBurning Posts: 429Subscriber, Professional
    Insurance isn't a +EV/-EV question. There's no expectation of profit in an insurance agreement so looking at insurance in terms of EV as a consumer is a mistake.

    You either retain the risk by not buying insurance or you share the risk with the insurance company for pennies on the dollar. I'm not a P&C agent but I think you also need to consider the potential loss via additional damage caused in a car accident. You may be able to cover $20k for replacing a car or whatever, but what if you cause additional damage to a home or business?
  • Bart HansonBart Hanson Posts: 6,115Administrator, LeadPro
    edited September 2016
    Have you talked to your insurance company? One thing I would ask is what hurdles are there to getting insurance again someday when you win the WSOP and buy a ferrari. I know sometimes if there is a gap in your insurance coverage, they jack up the rates when you try to come back. Definitely get the details on that.

    One thing you can do to diminish their edge is to manipulate your deductible. Your premium should be peanuts if you have a huge deductible.

    Everything that I am going to has to do in California. The "gap" in insurance that you speak of has to do with compulsory liability insurance not optional coverage like collision. You will not pay a higher rate for collision insurance in the future just because you did not have it in the past and or there was a period of time without it.

    Manipulating the deductible doesn't change much. Moving from $1000 to $2500 only saves about $200 per year on a $1000 collision option. Definitely not lowering the premium down to "peanuts"
    FreeLunch wrote: »
    Why would you keep comprehensive - thats the most -ev part of auto insurance.

    I disagree. Comprehensive ($1k deductible) insurance for my car is about $180 for the year. Comprehensive insurance covers damage done when the car is not moving. Things like theft, vandalism, fire etc. I actually have made two pretty large comprehensive claims on my insurance over the past 15 years. One time I had someone knife and key all of the hard paneling on the exterior of my car. The cost was just under $10k to fix. The second claim was for a large door dent and damage done in a parking lot. About $3000. Plus I can't control any damage that is covered under comprehensive. Like going out to a parking lot and some drunk moron has kicked in huge dents in your door (happened to me in college). I am definitely up in my lifetime on this option.

    Insurance isn't a +EV/-EV question. There's no expectation of profit in an insurance agreement so looking at insurance in terms of EV as a consumer is a mistake.

    You either retain the risk by not buying insurance or you share the risk with the insurance company for pennies on the dollar. I'm not a P&C agent but I think you also need to consider the potential loss via additional damage caused in a car accident. You may be able to cover $20k for replacing a car or whatever, but what if you cause additional damage to a home or business?

    Of course insurance is a +EV/-EV question. How do you think insurance companies stay in business? They have to make a profit on their coverage after all of the fraudulent claims that are made. The fraud, according to the FBI, increases premiums $400-$700 per family according to FBI. http://www.alevinegroup.com/2014/06/insurance-fraud-affects-you/

    Lets call that an extra 30% per person. So we are being charged most likely an extra 50% beyond what would be break even.

    In fact there is one specific group of people in LA (they also love poker) that are experts in committing insurance fraud. And they really don't try to hide it. I have heard anecdotes about bringing people over to the USA, opening as many credit cards as possible, maxing them out on goods and merchandise then leaving the country. Or auto and homeowner insurance scams. It all seems too easy and honest people pay the price.

    As far as the second part of your question goes with regard to additional damage to a home or business that is covered under property damage to others liability (which I hold a high level of coverage) not collision.

    Bart
  • BananaStandBananaStand Posts: 1,455Troll
    Bart wrote: »
    compulsory liability insurance
    Ugh, makes me cringe. But anyway...

    It seems pretty nitty to be splitting hairs over the EV of a $1K/year wager, especially when the downside is pretty huge and would come all at once. Just pay for the insurance Bart, be covered.

    You will feel pretty damn stupid if your car gets wrecked and you have to start from scratch. When you're pulling out $40K for some new wheels (you really gonna by another car for $18K?), will you really be able to convince yourself it's just variance and feel better?

    Also, a 20% discount for upping your deductible seems huge. What happens to your premium when you go to a $5K deductible??

    Frankly, given the way other people have treated your parked car over the years, I wouldn't ever leave the house. You've clearly got too many enemies, so just sell your car and buy a gun.

    Bart wrote: »
    In fact there is one specific group of people in LA (they also love poker) that are experts in committing insurance fraud...... It all seems too easy and honest people pay the price.
    IF YOU SEE SOMETHING; SAY SOMETHING

    If it seems "too easy" for these people to commit these crimes, it's because good people do nothing. The FBI has an anonymous tip line. Send me a name in PM, I'll call the FBI if you want.



  • FreeLunchFreeLunch Posts: 1,311Pro
    The low comprehensive price must be a CA thing - everywhere I have lived it has been the biggest waste of money. I have no problem keeping as much risk as legal. A big part of that though is I dont mind hustling for cheap repairs. The price of body work if your insurance pays is 5x or more what it should be so you can save a ton on insurance but you have to be willing to seek honest labor. You should take that into account when you say comprehensive has saved you money - if you are comparing what the insurance co payed as opposed to what you could have paid you may not have saved as much as you think. Recent example. I had someone back into me at walmart - left no note. I filed a claim with insurance - $1.4k damage on my 1k deductible. I found a guy who did the work for $600.
  • BananaStandBananaStand Posts: 1,455Troll
    FreeLunch wrote: »
    I filed a claim with insurance - $1.4k damage on my 1k deductible. I found a guy who did the work for $600.

    So what happened here? Did you make money? or did you just pay $600 instead of $1K?
  • TastesLikeBurningTastesLikeBurning Posts: 429Subscriber, Professional
    Insurance isn't a +EV/-EV question. There's no expectation of profit in an insurance agreement so looking at insurance in terms of EV as a consumer is a mistake.

    You either retain the risk by not buying insurance or you share the risk with the insurance company for pennies on the dollar. I'm not a P&C agent but I think you also need to consider the potential loss via additional damage caused in a car accident. You may be able to cover $20k for replacing a car or whatever, but what if you cause additional damage to a home or business?
    Bart wrote: »
    Of course insurance is a +EV/-EV question. How do you think insurance companies stay in business? They have to make a profit on their coverage after all of the fraudulent claims that are made. The fraud, according to the FBI, increases premiums $400-$700 per family according to FBI. http://www.alevinegroup.com/2014/06/insurance-fraud-affects-you/

    Lets call that an extra 30% per person. So we are being charged most likely an extra 50% beyond what would be break even.

    In fact there is one specific group of people in LA (they also love poker) that are experts in committing insurance fraud. And they really don't try to hide it. I have heard anecdotes about bringing people over to the USA, opening as many credit cards as possible, maxing them out on goods and merchandise then leaving the country. Or auto and homeowner insurance scams. It all seems too easy and honest people pay the price.

    As far as the second part of your question goes with regard to additional damage to a home or business that is covered under property damage to others liability (which I hold a high level of coverage) not collision.

    Bart

    You as a consumer cannot profit from an insurance claim. You can only get a loss replaced, nothing more. Therefore, there is no potential for positive expectation.

    I understand it is +EV for an insurance company to pay less in claims than what they take in - this includes their underwriting process that takes into account scams, etc. Looking at what your 'EV' vs their 'EV' is looking at insurance through the wrong lens.
  • Ne0Ne0 Posts: 59Subscriber
    edited September 2016
    It's a pretty decent idea as your car gets older and depreciates.

    "One rule of thumb for when to drop collision and comprehensive coverage is when the replacement value of the car is less than 10 times the annual premium you're paying for collision and comprehensive insurance.

    So if your auto is worth $3,000 and you pay $340 annually for that coverage, you may want to consider dropping it."

    http://www.wsj.com/articles/SB115724724470352757

    Makes a lot of sense if you are a good/careful driver. But, this is worrisome if you are more worried about *other* drivers on the road...

    "You’re worried about being hit by an uninsured driver. If you have no collision coverage, someone hits you and it’s their fault, their insurance will pay. But, what if you are hit by an uninsured driver? Obviously, there’s no one else to pay; if you don’t have collision coverage, you’re on your own to repair your vehicle. Maine’s ratio of uninsured drivers is quite low: 4%. But, we’re also inundated with drivers “from away” during tourist season. Many other states have much higher rates of uninsured drivers."

    http://www.noyeshallallen.com/when-should-i-drop-collision-coverage/
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