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I'm probably just not getting the majority veiw here. From what I gather, the belief is just go with liability and pay out of pocket to fix your $5000 car.

Consider this scenario (as it falls strictly into the context of my orginal post): You have a car valued at $5000 according to You have $5000 in the bank. A tree falls on your car and totals it. The insurance company pays out $3000. You now have $8000 in the bank. You buy another car for $5000, leaving $3000 in the bank. The insurance premium of $750 is coincidentally due, which is now $900 because of your recent claim. You now have $2100 in the bank. $1200 in rent is due. You now have $900 in the bank. Three days later your company suddenly lays you off. Your CPA sends the $500 income tax service bill. $900 in other bills are knocking at the door. Unemployment insurance is paying $2000/mo. You're barely surviving until you find a job. Also, you're wife's birthday is one week away.

To recap:
$5000 - to start
+ $3000 - insurance claim
= $8000
- $900 - new insurance premium due
- $1200 - rent due
= $900
($1400 in additional bills are due)

Now consider my scenario: Pay the full coverage until you have something close to the value of the car plus your nest egg in the bank.

After paying $1400 in bills, you have $3600 left. Add this to your $2000/mo unemployment insurance for four months of job looking and you have $2900/mo. This is implying that in one year, $5000 can be saved and added to the top of the current nest egg.

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