The cost of owning a car goes well beyond the sticker price at the dealership. There are fuel costs, routine maintenance and, of course, car insurance.
The seemingly endless options for car insurance can be overwhelming, so many drivers end up opting for coverage they don’t actually need.
Liability coverage is the most basic form of car insurance and is absolutely necessary. Should you be deemed at fault for an accident, liability coverage will take care of the medical costs for other people injured and costs of repairs for other vehicles — but not yours. Some states require additional types of coverage beyond liability.
However, there are certain types of coverage that you can and potentially should opt out of, depending on the value of your car, your current finances, your health insurance policy and more.
So what types of car insurance can you skip?
1. Do I Need Collision Insurance and Comprehensive Coverage? When to Skip
Collision insurance covers damage to your car in the event of an accident, whether you were at fault or not.
Comprehensive instead covers damage to your car outside of an accident, like flood damage due to a hurricane, vandalism, theft or fire.
If your car is worth a lot of money, you should absolutely carry these coverages, and if your car is financed, your lender may require you to. But you may be wondering: Do I need collision insurance, especially if my car is old?
If your car is old or you paid a small amount of cash for a used car that may only last for a few months, you’d be wasting your money to get collision and comprehensive.
“Your reward is diminished greatly once your vehicle has depreciated over the course of time,” said Melanie Musson, insurance writer for CarInsuranceComparison.com. “So, if you’re paying monthly for coverage that’s going to provide you with minimal payment should you total your vehicle, and then you’ll face higher rates after making a claim, it’s just not worth it.”
One caveat: Be prepared to pay out of pocket to fix the car or, more likely, to purchase a replacement vehicle. But if your vehicle is only valued at $1,000, it may be better to put money each month into savings for a replacement vehicle than to shell out money for coverage on that low-value vehicle.
Chris Tepedino, also of CarInsuranceComparison.com, warns that bundling uninsured motorist and collision is often a mistake.
“Uninsured motorist protects your car if it’s hit by someone who doesn’t have insurance,” he said. “Collision, well, protects your car. Don’t be suckered into thinking you have to buy both. Overlapping generally doesn’t help.”
2. GAP Insurance: It Depends on Your Down Payment
Vehicle depreciation can be a major detriment to your finances, especially if you wreck your vehicle shortly after financing it.
Because a car loses about 20% of its value when you drive it off the lot, insurance will only cover 80% of the initial sticker price should you get in an accident on your way home. That means you will be responsible for the other 20%. With the average new vehicle costing $37,401, that could mean you lose out on nearly $7,500.
That’s where gap insurance (guaranteed asset protection) comes in, covering the difference between what you paid for a new car and how much your regular insurance is willing to pay for the totaled vehicle.
But depending on how much you put down for the car versus how much you financed and how much that car is worth, you might not need gap insurance.
“Gap coverage isn’t necessary if you’re able to financially handle the risk of paying the difference between what you owe and what your vehicle is worth when you’re upside down on a vehicle loan,” Musson said. “If you make a 20% or greater down payment, your risk for needing the coverage is greatly lowered, and you may be able to forgo that coverage.”
Similarly, you don’t need gap coverage if you’ve paid off your vehicle or if you purchase an old vehicle that won’t depreciate as quickly, Tepedino said.
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3. Rental Car Reimbursement: Probably Not Worth It
A luxury option you can add to your policy is rental car reimbursement. If your vehicle is damaged and must be repaired, this coverage gets you a rental car to use while your vehicle is out of commission.
However, the cost of paying for this each month would likely exceed the cost of a rental vehicle, unless you crash frequently or need a rental for multiple weeks.
Even then, you may be better off relying on friends and family for temporary transportation, if possible. If you live in a two-vehicle household, consider getting by on one vehicle temporarily instead of opting for this coverage.
4. Roadside Assistance: Check Your Warranty First
Similarly, you can opt for roadside assistance for help with jump-starts, flat tires and more serious problems that leave you stranded. However, many new cars come with roadside assistance, often throughout the length of the warranty.
“You can skip roadside assistance, as long as you realize you’ll have to pay for a tow out of pocket,” Musson said. “You may even be able to find it cheaper from AAA or a similar service.”
If you live paycheck to paycheck, this additional insurance expense is one to avoid.
5. MedPay: Depends on Your Health Insurance
Medical payments coverage, also known as MedPay, is an optional coverage that assists with medical expenses after an accident. However, if you have decent health insurance, you can likely skip this coverage.
Want to Save Money on Car Insurance? Proceed With Caution
The cost of your insurance is proportional to the deductible and coverage limits you choose. The lower your deductible and higher your coverage limits, the more you’ll pay in insurance premiums.
“This is a little dangerous, but if someone is wanting to save money, going with lower coverage limits may help,” Tepedino said.
But Tepedino warns that this is a risky way to save money. “The average cost of an accident with property damage alone is $7,500,” he said. “That number obviously jumps with a death or severe injury, so go at your own peril.”
Brent Weiss, a certified financial planner and co-founder of Facet Wealth, believes there are some types of coverage you can consider avoiding, but he urges caution when you’re shopping for car insurance.
“I am not a fan of simply meeting state minimums,” Weiss said. “It puts too many families at risk of a financial loss they cannot cover. In general, I recommend having liability coverage for bodily injury and personal property, underinsured and uninsured motorists, and collision and comprehensive coverage for most cars. There are some personal injury coverages that may be required, but limits are typically low. The bottom line is that you want to get the right coverage with the right limits and not simply shop for the lowest premium. You often get what you pay for.”
Timothy Moore leads a team of editors and graphic designers at a ma [...]
Did you set goals for 2019? Here’s an update on how I did on my 2019 goals in June.
It’s July 6, 2019. And it’s time to check in on our goals! How are you doing on the goals you set for 2019?
I spent some time today reviewing June and reflecting on the blessings of the past month and the lessons I learned. I also looked at my goals and how I was doing in each area. (If you missed My Goals for 2019 post, read it here.)
In order to keep myself accountable (and because I know some of you really enjoy these posts) I’m sharing a goals update post at the beginning of each month. I hope that this will not only motivate me to be focused and intentional this year, but I hope it might also inspire you in the goals you set for 2019.
So here’s my goals update for June 2019:
1. Read 40 books I already own. (I’m using GoodReads to track my reading this year!)
Update: I finished 6 books in June — and one of them was from my list of books I already own and wanted to read this year. Look for a Book Update in the next week!
2. Slowly read through the New Testament using the She Reads Truth Bible reading plans at the beginning of each chapter.
Update: I finished Galatians, Ephesians, Philippians, Colossians in June.
3. Listen to 2 audiobooks per month. (I use the Libby app to get these for free.)
Update: I finished to 2 audiobooks in June.
4. Complete all of the Organize in 5 Diary tasks to get our home more organized and set up better organizational systems. (Psst! Did you get yours? It’s just $9 right now.)
Update: I have been keeping up with this. (You can see two posts I did on some of my organizing projects in January and February: Cleaning Out the Cookbooks & Organizing My Purse & Bathroom.)
5. Stay offline for 4 hours per day, 5 days per week. (I share more about why I chose this goal here.)
Update: I did a pretty good job of this in June.
6. Leave my phone in the basement every night. (I talk more about what inspired me to make this goal here.)
Update: So, honesty here: Ever since I took email off my phone at the beginning of May, I haven’t really felt such a need to not have my phone by my bed and I’ve sort of slipped out of this habit. But I want to get back to it!
7. Go to bed before 10:30 p.m. 5 days per week. (I’m using this little spreadsheet I made to track most of my personal goals)
Update: I bombed this goal in June. But we traveled a lot and were in different time zones + it’s summer, so I’m not beating myself up over it. But I do want to get back to this in July!
8. Go on an overnight trip with Jesse without the kids.
Update: We went on an incredibly fun trip to Destin, FL! Jesse and I drove by ourselves to FL and then we met up with two other couples there. We stayed in an AirBNB and split the cost three ways. Since it was off season, it made for a very inexpensive trip and we had the BEST time!
9. One-on-one time with each child at least 3 times per week. (I am planning to dedicate 40 minutes per child after dinner each evening at least three nights per week to hang out and spend time with each child individually.)
Update: I spent a lot of time with the kids in June because of all of our traveling, but I didn’t spend as much one-on-one time with them. It was a lot of all together family time. I’m looking forward to getting back to this in July.
10. Take the kids to at least two continents and 4 states we haven’t traveled to. (We’re hoping to travel to Europe in the summer and South America at some other point during the year.)
Update: We went to Iceland (Europe) in June and Utah to meet up with all of my extended family at the very end of June. I’m not sure if we’re going to be able to cross another continent off our list this year… I’m still hoping to find a really good deal on flights/travel, but we’ll see.
11. Pay cash to redo our room and renovate our bathroom (we have to pull out the shower and put in a new one because it was installed incorrectly and is leaking and ruining the floor/wall and we want to do a few renovations while we’re at it + we want to finally decorate our room — we left it really bare when we moved in and decided to wait to prioritize it in the budget).
Update: We started on the bathroom renovation at the very end of June.
12. Pay cash to paint the walls in the main floor of our home.
13. Fully fund our Emergency Fund.
Update: This is DONE! YAY!
14. Redo/set up a much more intentional customer acquisition experience for all three of our email newsletters.
Update: We’ve been hard at work behind the scenes working on this and made some BIG progress in June.
15. Finish launching the rest of our beginner Your Blogging University courses. (If you want to start a blog, be sure to check out my other site, Your Blogging Mentor.)
Update: I’m working on my next course, Monetize Your Blog, and it’s going to be a bigger/more comprehensive course than I’ve ever done but I’m continuing to make good progress.
16. Launch a Blog Coaching/Accountability Group membership. (I’ll be opening this up to a very limited number of people in January of 2019. Stay tuned!)
Update: We opened this up to new members in April and I’m just loving leading this! Interested in being the first to find out when we open up to new members again? Be sure to join the waitlist!
How are YOU doing on your goals for 2019? I’d love to hear about your successes and struggles. Tell us in the comments! [...]
There’s a common myth that it’s impossible to rebuild your credit while your credit reports are still scarred by a bankruptcy — and you’ve proven it wrong.
You’ve re-established credit. You’ve managed it responsibly. Now, you have a pretty darn good score to show for it, even with a bankruptcy in your file.
But there seems to be a different misconception implied in your question: that it’s impossible to buy a home while a bankruptcy is still on your credit report. This, too, is a myth.
I think you have two questions here: How long will a bankruptcy stay on your credit report? And will a bankruptcy hold you back from buying a home?
Let’s start with how bankruptcy affects your credit. A bankruptcy is one of the ugliest battle wounds you can have on your credit report, but you didn’t need me to tell you that.
And the effects are long-lasting. A Chapter 7 bankruptcy — the kind where many of your assets are liquidated and you emerge with no debt obligations — stays on your credit report for 10 years after you file. A Chapter 13 bankruptcy, in which you repay a portion of your debts, will fall off your reports after seven years.
The effect of bankruptcy on your credit score is most acute in the year or two after you file. But as you build a positive credit history, it matters less and less. The fact that your score is at 742 suggests your credit has already recovered significantly.
But will that be enough to overcome a bankruptcy when you try to buy a home? You don’t say whether you’ve actually been denied for a mortgage or if you’re waiting for the bankruptcy to drop off your report before applying.
To qualify for a conventional loan (the kind that isn’t insured by the government) after filing Chapter 7 bankruptcy, you’ll typically have to wait four years after the bankruptcy is discharged. For nonconventional loans (the ones that are backed by the government, such as FHA or USDA loans), the requirement is usually two or three years.
You’re long past the required waiting periods, but keep in mind that these are just minimums. Every lender has different requirements.
If you do forge ahead now, be prepared to document your finances and how you’ve managed credit since filing bankruptcy in painstaking detail. Making a large down payment could help you get approved, but you should still be prepared for higher interest rates.
If there were extenuating circumstances that factored into the bankruptcy, like a job loss or illness, providing a letter of explanation with supporting documents could help you get approved.
But even if you can’t get a mortgage on the terms you want, remember: Ten years is a long time, but you’re so close to the end. In another two years or so, your bankruptcy should automatically be deleted from your file.
When you do reach the 10-year mark, you can verify that the bankruptcy has been removed by obtaining a free copy of your credit report from each of the three bureaus at AnnualCreditReport.com. If it still appears, you can request that they remove it stat.
Bankruptcy may seem like a scar on your credit report, but it isn’t permanent. Because time heals both old wounds — and derogatory credit marks.
Robin Hartill is a senior editor at The Penny Hoarder and the voice behind Dear Penny. Send your questions about rebuilding credit to AskPenny@thepennyhoarder.com.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017. [...]