Is it possible to over-insure your car?

Too much of a good thing can be bad for you, as the saying goes, and that rings true even for car insurance. Wall-to-wall coverage for your beloved vehicle can be good, but if you are paying through the nose to get it and when you have other bills to pay, it can exact a heavy toll on your monthly expenses. 

Instead of going for maximum coverage, take stock of what you can afford and what types of coverage you can drop. When buying an insurance policy, it’s important to have a grocery list of sorts already in your head so you don’t get oversold on the idea of protecting your car when you do push through with your insurance policy.

Insurance can cover many things in life, including life itself. Cars are a form of property insurance with their own nuances, but there are things like life insurance that crossover into the automotive insurance realm. For example, some companies and policies will offer you bodily injury coverage with a corresponding payout, however, if you already have life or health insurance, or if your passengers already have a policy like that, then it seems redundant to have the bodily injury add-on in your policy. While redundancies are good just in case, you have to consider whether your health or life insurance policy that you already have or are looking to get will be sufficient enough should things go awry. That way, you can save a bit of coin while paying for your policy, unless it’s thrown in for free, of course. 

Think about it this way, you never know what will happen out on the road, so it is good to have insurance for a rainy day. However, even if you never know, you have to know yourself and the risks that you may face day-in-and-day-out. For example, Acts of God coverage is good for people that live near flood-prone areas or places where natural calamities hit the hardest. If your live in a place that doesn’t flood all too often, then perhaps it is worth considering dropping the additional coverage. 

For your financial situation, however, that is another story. Think about whether you can afford the price to cover your risks, and that you have to pay a monthly or yearly premium for your vehicle, so that’s cash out of your pocket. Consider getting your insured based on your current living situation and get some of that cash flow back into your pocket. You don’t have to get the wall-to-wall coverage all the time. Insurance is about managing your risk, and you should consider the risks that are worth trading off for just so you can save a bit of money. 

There is an all-too-real threat in the automotive industry called depreciation, and that market force, well, forces buyers to take a lower price or valuation for their car the older it gets. Remember that insurance companies can reimburse you the cost of the car based on “fair market value” at the time of its untimely demise, and some cars depreciate much faster than others. Fair market value is also a very fluid number, so your mileage may vary depending on your car. It’s something to keep in mind and to think about especially if you are choosing to insure an old vehicle. Remember that the value of that vehicle tends to drop over time so you may be losing out and it may not be worth it to get a ton of coverage for that vehicle especially for add-ons like collision coverage. Smartmoney.com puts it well and states that if the cost of coverage is greater than 10 percent of the value of the vehicle, and if the cost to repair the vehicle is something that you can afford, then consider dropping the coverage. Think about it this way, if a little fender bender costs you a little cash out compared to covering it monthly, then consider dropping the coverage if it is an old vehicle. 

Think about it this way, you never know what will happen out on the road, so it is good to have insurance for a rainy day. However, even if you never know, you have to know yourself and the risks that you may face day-in-and-day-out. For example, Acts of God coverage is good for people that live near flood-prone areas or places where natural calamities hit the hardest. If your live in a place that doesn’t flood all too often, then perhaps it is worth considering dropping the additional coverage. 

For your financial situation, however, that is another story. Think about whether you can afford the price to cover your risks, and whether you have to pay a monthly or yearly premium for your vehicle, so that’s cash out of your pocket. Consider getting your insured based on your current living situation and get some of that cash flow back into your pocket. You don’t have to get wall-to-wall coverage all the time. Insurance is about managing your risk, and you should consider the risks that are worth trading off for just so you can save a bit of money.