On consumerism: Auto and home insurance: Know your options | weekend magazine

When I was young, a long time ago, I realized one day that I was spending $1,000 a year on collision insurance for my car, even though my car was no longer worth $1,000. So I waived collision coverage. And he never regretted it.

The last car loan I got was in 2002. After paying off the car in 2005, I waived comprehensive and collision coverage. And he never regretted it.

That 2002 car lasted until 2018. So for the last 13 years of his life, I paid nothing for the car and paid minimal insurance.

An old friend named Gus had a car but never drove it. He lived in a huge apartment building in Queens (a part of New York City) that had no parking. Driving the car would mean missing the spot on the street where Gus’s car was parked. It can take hours to find another available spot (that’s how densely populated the area is). So Gus never used his car. Like most locals, he got around by subway.

Why did he own the car he never used? Well, he inherited it from his father, and maybe that sentimental value led Gus to keep it.

One day I asked Gus if he had canceled the collision coverage on his car policy that he never used. No, he hadn’t.

Gus eventually donated that car to charity and received a tax break. The car had to be towed, because it no longer worked. However, it was fully insured until Gus’s last day of ownership.

My father preferred to rent cars. After three years, he would return the car and rent another. That way, he explained, he always drove a new car.

To each his own. We all have our preferences. But we should at least be aware of our options.

Auto insurance comes with many options. The owner decides which options to select. If you rent, the owner is the leasing company. If you borrow to buy, the owner is the company that finances your loan.

Whether you lease or buy, the lender can repossess the vehicle if you default. This is because until you pay off the car, you don’t fully own it.

But once the title is yours, you no longer need to insure your car against collision damage. Or against theft. Or against what are called “comprehensive” damages, such as broken windshields. Now it’s your decision.

Do you have a car directly? Then you are not required to insure it for collision or comprehensive coverage. If it’s new enough or valuable enough, it might be smart to insure it. But it’s still your choice.

My car insurance bill came in last week. I waive collision coverage and comprehensive coverage. (If you didn’t have a garage, you could secure it another way.) The bill amounts to $93 for a period of six months. Which means less than $16 a month.

What is the car insured for? Against damage to other people and their vehicles or other property. Such insurance gives me peace of mind.

If he wanted, he could even avoid that $16 a month by canceling the insurance. I would rather not. Still, it is an option in New Hampshire for the owner not to insure a car that is fully paid for.

The drawback is that without insurance, you would not legally be allowed to drive to any neighboring states, as they all require insurance. So unless you’re willing to keep your car in New Hampshire forever, you’re better off insuring it.

Home loans are simply car loans on a larger scale.

When you apply for a mortgage on a home, what is your collateral for the loan? Usually the house itself.

That is why mortgages, as a general rule, require you to take out home insurance. An insured home is much more valuable to a lender than an uninsured home. If you default on your mortgage, the lender will eventually have the right to evict all residents and sell the

House. But if, for example, it has burned to the ground, then the lender ends up with nothing of value to sell.

Hence, home insurance has become a requirement for a mortgage.

Some people mistakenly think that home insurance is mandatory. It is not.

Yes, it is required as an element of your mortgage. But suppose there is no mortgage, or the mortgage has been paid off. In that case, homeowners are not required by law to insure their homes. Homeowners have the option to reduce or cancel their home insurance.

I have yet to meet a homeowner who is willing to take the risk of going without home insurance, but it is still an option. A smart consumer knows all the options.

The goal of insurance should be to give the buyer peace of mind. And to honor one’s loan agreement.

Buy enough insurance to do so. Anything else is strictly optional.

Arthur Vidro is one of the recurring financial columnists for the Eagle Times.

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