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Ask Dave

When Is It Okay to Have Liability Only Car Insurance?

Kim's daughter is having health issues. She wonders if they should drop full automotive coverage to help save money.

QUESTION: Kim and her husband in Wisconsin make about $85,000 a year and are debt-free, including their home. They also have $100,000 in savings. They’re concerned about bills in the future, because one of their teenagers was recently diagnosed with Crohn’s disease. In addition, both her and their other daughter are old enough to drive. Their car insurance is due for renewal, and Kim wonders if Dave has a formula for when someone should drop full auto coverage and only have liability. Saving money is a priority for them at the moment.

ANSWER: I understand worrying about the medical diagnosis, but financially speaking you guys are in pretty good shape. You’ve got a nice income, you have a big chunk in savings and you’re debt-free. No, I’m not going with liability coverage only when there are teenage drivers in the house. There’s a reason auto insurance rates for teenagers is so high. It’s called statistical analysis of their driving ability. That’s a nice way of saying they’re not good drivers! I haven’t had a wreck in 20 years, but I’ve had some kids who did. No, I wouldn’t drop the coverage. Right now, you’re looking at the very real possibility of recurring medical bills for the foreseeable future. I wouldn’t take a chance on having to write a check for another car on top of all that.