>There’s little reason to carry full coverage on a car over 7 years old

Can you elucidate? I assume by 'full coverage' you mean comprehensive (you get paid if your car gets damaged), vs liability-only (other person gets paid if you damage their dar).

Doing some very approximative math, my 7 year old car is worth $12k, and adding comprehensive insurance costs an additional $500/year. Why is it so obvious I wouldn't want that?

Do you figure there is a 4% chance your car gets totaled each year (in a crash that’s not someone else’s fault)? That sounds pretty high.

I don’t buy collision for a few reasons:

1. I can afford to self-insure.

2. If I pay for collision, I’m more likely to make a claim, which will make my insurance even more expensive in the future. Also, using insurance makes the repairs more expensive, and otherwise incurs more costs to society (various people will be involved in the claims process). These costs are incorporated into the price of the insurance.

I can understand paying for it if losing your car would ruin you, or if you think you are much more likely than average to crash (in a way the insurance rate for your demographic doesn’t capture), but otherwise it seems like a bad deal.

Different states call it different things, but I’m talking about dropping “collision” and “other than collision” coverage as the car gets older.

Your chance of a total loss on the car from a collision that’s your fault or a non-collision loss is well under 4%/year (the economic break even if your additional coverage is $500 on $12K). If you can’t write a check for $12K, you might need to keep the coverage. If you can, you make money (statistically) by dropping it.

Making money based on statistics is what the insurance company does. The whole point of insurance is paying extra money to the insurance company in case I'm personally on the wrong side of the statistic.

That makes sense for ruinous losses. If $12K would be a ruinous loss, you’re doing precisely the right thing, if you assume you have to have that exact car.

Having a $5K car would probably be more financially appropriate, but that’s a side topic when considering only “buy this insurance or not”.

If you choose to self-insure, that only lowers your true cost by whatever the insurance company's profit margin is, not by the full amount of the payment.

You might come out ahead, you might come out behind, but the risk of losing the car is still, on average, costing you something.