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If you're running around in an old car like us, you can see if it's worth keeping the collision and comprehensive coverage using this method.
•Reduce coverage for an older vehicle. If the economic downturn has forced you to hold on to a car that's held together by duct tape and prayer, make sure you're not insuring it for more than it's worth. If your car is totaled, all your insurer will cover is the current value of the car.
You can reduce your premium by 40% or more by getting rid of collision and comprehensive coverage. Trouble is, it's not always easy to determine when it's time to ditch this coverage. These days, even a 5-year-old car that originally cost $50,000 could still be worth a lot of money, says Brad Cooper, senior vice president for InsWeb.
Here's a good rule of thumb from the Insurance Information Institute: Drop collision and comprehensive coverage if your vehicle is worth less than 10 times the premium. You can get an estimate of your vehicle's current value at Kelley Blue Book, www.kbb.com.
Read more suggestions here.
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Yeah, that calculation only makes sense if you have enough in the bank to cover the purchase of another clunker. I'd say about $5,000 should be enough for a dependable car. My last two have been less than that and each lasted more than five years. Otherwise you'd have to look at the life expectancy of the car. Expect another three years out of it? Don't pay more than 3 x the value??
Hmm... my car's about borderline on the 10 times the value. I worry that if I dropped it, I'd have an accident and not be able to afford another car. Something towards it would be better than nothing.
Without frugality none can be rich, and with it very few would be poor.
- Samuel Johnson