Can You Save Money by Suspending Your Car Insurance?
Since many companies are extending work from home policies until next summer , you may no longer need your car to travel to work. Since the average family has almost two cars , could you leave one in storage and save money by canceling your car insurance until you need it again?
Canceling and “canceling” later
The obvious way to get a break from your car insurance if you don’t use your car is to cancel your insurance right away and then buy it again later. However, this only works if you get rid of the car. Cancellation – even temporary – is not ideal, as your registered vehicle is usually required by law to have insurance even if you are not driving it, and later you will receive higher insurance rates for a coverage break (up to 29% more according to ValuePenguin ).
If you still use your car, you need to insure it to stay legally and financially secure. On the other hand, if your car is safe in the garage and you don’t intend to drive it, you still have options, although they depend on your insurer, so contact them directly to see which ones apply to you.
Suspension or suspension of your insurance
Insurance companies rarely allow customers to temporarily suspend insurance, but they may be willing to do so due to a pandemic. If they allow you to suspend your coverage due to hardship, you will have to sign an “affidavit of non-use” and file it with the DMV. Essentially, this means that you are reassuring that you will not use your car at all to both the state and your insurer. However, there is one big snag: if you pay for a car on a loan, you probably won’t be allowed to suspend payments or insurance coverage.
Cancellation of liability and accident insurance
This is a rare option as most states require liability insurance. Liability covers damage or injury caused by your vehicle, and collision covers damage to your car in case of traffic accidents. Naturally, it is difficult to injure someone or get into an accident if your car is under a tarp in the garage, so some insurers may allow you to suspend these insurances. However, your insurer still requires you to pay for comprehensive insurance that protects your vehicle from theft, fire, or hail. This option is known as “car storage insurance”. (If you have a car loan, you may still have to pay for accident insurance.)
Go to liability coverage only
Basic liability coverage is the minimum auto insurance standard and is required by law in most states. You can refuse from an accident and a comprehensive insurance policy, but again, only if you do not drive a car at all. In addition, many lenders will make a comprehensive agreement binding as part of your agreement. This is a risky move, as without comprehensive coverage, your car could be damaged by flooding or stolen, and you will have to spend that money on yourself. Proceed with caution.
Switch to user-based insurance
You can switch to user-based insurance , a new form of insurance that determines your rates using a device in your car that tracks how you drive. What’s great about this option is that you can lower your insurance premiums and still drive (as opposed to the previous options). Specifically, buying a pay-as-you-drive (PAYD) plan, which is based on miles driven and rewards people who barely use their car, can save you anywhere from 5% to 40% depending on your driver type. …