Category Archives: Insurance

When Does It Make Sense To Self Insure?

When we bought our new Toyota Camry, we realized that as soon as we drove the car off the lot, it would lose a couple thousand dollars in value. But if our car got totaled, our insurance would only cover the current value of the car, not the full cost we paid for it. Some insurance companies cover this difference with ‘gap insurance,’ and in almost every case, the company selling you the car will offer this type of coverage, too.

Insuring Against Disaster

Our car insurance company actually doesn’t offer this coverage, so we were left with one option: going with Toyota’s gap insurance coverage. They offered it for around  $10 a month, but with no option to cancel it once the value of the car gets below the amount on the loan, the total came out to around $550-$600 over 5 years, which doesn’t sound bad, but when you break it down, that’s a terrible deal.

The point of gap insurance is to cover the difference between how much you owe on your car loan and how much your car is worth. On the day you drive your car off the dealer lot, that amount is at its highest (likely several thousand dollars), and it decreases over time. After about 6-12 months, the amount you owe lines up with the amount your car is worth and there is no longer a need for gap insurance. After that, gap insurance is useless because it

Why This Insurance Isn’t For Us

Sometimes, you’re able to cancel gap insurance (when you have it through your car insurance, this is the case), but when you go through the dealer (at least our dealer), you can’t cancel the insurance, it lasts for the life of the loan (even though it only has any value the first few months). To break it down, paying nearly $600 for insurance in case your car is totaled in the first 6 months is a terrible deal. It will save you a couple thousand dollars if you total the car, but if you don’t, you’re out $600 with nothing to show for it. Unless you think you have a 20% or higher chance of totaling your car in those 6 months, it’s simply not worth it.

Our Decision To Self-Insure

We decided to skip on gap insurance. It doesn’t provide enough value to us, and the cost is too high. If the car is totaled in the next 5-6 months, we’ll have to suck it up, but it won’t be the end of the world. We know the math works out in our favor and the worst case scenario is unlikely and we would be able to absorb the blow, so we self-insured in this case.

When You Should Self-Insure

In many cases, insurance is a necessary expense that must be paid. Sure, we’re unlikely to use it, but it protects against disaster. You never think you’ll suffer a terrible illness, but you never know, so you buy insurance for several hundred dollars a month. If you ever need to use it, it won’t cost you tens of thousands of dollars. Rarely do houses burn down, but without coverage, your life could be ruined if by some awful chance, it happened to you. These are perfect scenarios to get insured because you can’t afford the disaster, no matter how unlikely it is.

In the case of gap insurance, the worst case scenario wasn’t going to ruin us financially, just set up back a few thousand dollars. If you can afford the worst case scenario, it likely makes sense to self insure. We’d be out a couple thousand dollars, but that would come out of our long-term savings. In the short-term, not much would really change. And this way, we get to keep our $600, too!

Have you ever self-insured? What would you do in our case?

How Reducing Coverage Saved Us $600 Per Year On Our Car Insurance

We’ve all seen the car insurance commercials that promise to save us hundreds of dollars if we switch to their company. I’ve never actually met someone who was overpaying their car insurance by so much that simply switching companies (and keeping the same coverage) resulted in a saving of several hundred dollars.

Sure, you can get quotes from a company that is $400 higher than what you’re paying, but I don’t count that as actually saving $400. It’s simply not paying $400 more for the same product. It’s absolutely the right financial decision, but it’s not saving.

Our Old Car Insurance Coverage

For the past two years, we’ve had approximately the same coverage. We have been paying around $775 for a 6 month period. We switched from Progressive to GEICO when we realized we could save $86 per year.

Recently, I decided to look into how much car insurance we really need instead of simply looking at how much we were paying. I discovered that we were probably paying for coverage that we didn’t need.

The three portions of the policy I investigated were Medical Payments, Collision, and Comprehensive Coverage.

Our New Car Insurance Coverage

The first thing we did was drop medical coverage. We were paying well almost $100 per year just for medical coverage that we likely would never be able to use. The reason it was unlikely this policy could ever kick in is that we are already covered by our health insurance. This was the easiest decision, so we removed this from our policy without much discussion.

Next was the comprehensive coverage. This coverage pays for loss or damage caused by “fire, theft, vandalism, hail, windstorm, riot, falling objects, flood, collision with an animal.” While these are unlikely to happen to us, it was under $100 per year, so we kept it on there. However, paying $100 per year doesn’t make sense when there is a $1,000 deductible. If something was to happen to one of our cars, we’d still have to pay the first $1,000 in damage. Well, our cars are not new and not worth all that much, so by the time we pay $1,000 we might as well start looking at getting a new (or used) car.

Finally, we got to collision coverage. This was the hardest decision to make, but it was by far the most expensive as we were paying over $500 per year for this coverage. This coverage pays for accidental damage to your vehicle caused by collision with another vehicle or stationary object. Obviously if someone else is at fault, they are responsible for the damage and will pay it. If I am responsible, I will have to pay the first $1,000 in damage to my car as a deductible, plus the $500 per year just for the right to use it. Again, our cars aren’t worth that much and if we get into an accident that requires that much repairs, we will consider getting a new car.

How Much We Saved By Reducing Our Coverage

In all, our savings totaled $617 per year of $308.50 every 6 month term. That’s a lot of money we were able to save just by reducing our coverage. I encourage everyone to look at their car insurance coverage to make sure they need them. Paying hundreds of dollars for something you won’t (and in some cases, can’t) use is silly, so if it makes sense in your situation, consider dropping those extra coverage options.

Arranging for Your Pet’s Care After Your Death

Every year across America, healthy pets who have enjoyed loving homes find themselves in shelters and pounds because their owners have either grown too infirm to care for them or have died, leaving them bereft of love and comfort. Many of these pets, a great percentage of which are young and well trained, are put to death because no homes can be found for them. If you own a pet and find the thought of it meeting this kind of end, then there is something you can do about it. By creating a legal document and naming a pet guardian, as well as setting up a fund that will provide for your pet financially, you can ensure that your pet will live out its life in the care of someone who will love and provide for it.

The Responsibilities of a Pet Guardian

Many people aren’t even aware that funds and a guardian can be arranged for your pet in the event that you can no longer care for it. However, you can create a binding legal document with a guardian of your choosing, as long as he or she is willing to care for your pet after you die. Not only can you name a guardian of your choosing, you can also dictate what he or she can and cannot do with your pet. For instance, you can forbid the guardian from transferring ownership of the animal to another, unless in extreme cases, and ensure that the funds you leave are used only for the pet’s food and veterinary bills. Of course, you should choose your pet’s guardian carefully and make sure it is someone that your dog or cat knows and trusts. It will be in a state of confusion during the transition and will need extra reassurance and affection from that person.

Creating the Legal Papers

Once you have named a guardian for your pet, you are then ready to create the legal papers you will both have to sign. You can either get a local attorney to help you arrange the papers or even see legal help online. If you choose to go this route, make sure you know what you’re getting into before you make a final decision. Read Legal Zoom reviews and reviews about other online legal companies before you commit. Once you find a company that meets your needs, they will prepare the papers to your personal specifications and even help you set up a special bank account that you can add to in order to provide for your pet should you become seriously ill or die. While many people consider providing for their spouse or children in the event of their death, few people think of their pets and assume that family members will step in to care for them. However, in many cases, they might not have the room, time, or finances to take on a pet, and your beloved furry friend may find itself facing euthanasia. To make sure this doesn’t happen, you should make the naming of a pet guardian a priority as a part of your living will.