Since Covid-19 started spreading through the U.S., cities around the country have seen rush-hour traffic jams vanish as a result of lockdowns and social distancing. The Public Interest Research Group (PIRG) found that the household vehicle travel in the U.S. declined by 68% to 72% during the last two weeks in March and the first week of April of 2020, compared with the first week in March of the same year. With many people working from home, and commuting being less often and almost unnecessary, should drivers even consider canceling their car insurance policies? Check out what the experts recommend.
Be aware of the risks
When it comes to canceling auto insurance, the expert advice is straightforward: Don’t cancel it. Mostly because this can cause an increase in rates when you want to sign up again, so in the long run, the savings won’t be substantial. Some companies might even charge a cancelation fee and other insurers might deny you coverage if you have a lapse in your policies.
Besides being illegal in most states, Lev Barinskiy, CEO of SmartFinancial Insurance, says that when you don’t have an auto policy, you will have to pay out of your own pocket if you have an accident. The costs include medical bills for yourself and the other driver, damage to the other vehicle, and repairs to your car.
Ariana Gibson, Head of Driver Insights at Clearcover, says she wouldn’t recommend suspending an insurance policy even if you are not using your car because “you’ll want to keep your coverage if the vehicle is damaged or vandalized while parked. We are entering the season when storms can bring hail or wind to knock down tree branches.” There are other non-driving risks such as fire, floods and thefts that are covered by your car’s insurance.
If you still decide to cancel your auto policy, Barinskiy recommends that when it’s time to buy a new policy, you should shop around to improve your chances of landing a better deal. “Be aware that you will be paying more for auto insurance now that you have a lapsed policy on your record. But you may find a company that will charge you less than others. And that’s the company for you following a car insurance lapse,” Barinskiy says.
7 Ways to Save on your Car Insurance
Instead of canceling your policy, experts recommend eliminating add-ons that might be unnecessary right now. If you’re looking for ways to trim your car insurance payment, here are some examples of services you could cut off or adjust.
- Ask for a Car Insurance Lapse Grace Period
Barinskiy says that some auto insurance policies come with grace periods of three days and other companies give you up to 30 days to get current on your car insurance payments. Be aware that even if a few state insurance departments order or encourage companies not to charge late fees, you might still have to pay them.
- Enroll on a Low Mileage Tracking System
When your driving habits change, there might be more cost-effective ways to pay for what you use. Gibson encourages you to ask your agent for options like a low mileage tracking system with telematics to get some deductions. This way, you can determine your rates based on your actual driving habits and skills.
- Raise your Deductibles
Brent Thurman, president of Keystone Insurance Services, recommends raising your deductibles during the period that your vehicle won’t be driven. Even if this makes the deductible higher if you were involved in an accident, your premium will be lower.
- Reduce your Coverage
Kristen Maurice, from Advocate Insurance, says that a better option would be to reduce the coverage. For example, instead of paying for full coverage, you can switch to your state’s minimum liability coverage. This is a great option if you are only driving to go buy your weekly essentials.
- Eliminate Road Assistance
Call your agent, ask to cut out road assistance for a while. If you are only driving a mile or two to go to the grocery store once a week, this could be useful to save some money, says Gibson.
- Switch Providers
Patrick Nugent, a photographer from New York City, wanted to switch insurance during the shutdown. He was not pleased that his previous insurer did not offer a small rebate on their policies as other insurers did. He spoke with an insurance agent who got him quotes from different providers and found a cheaper insurer. His current yearly saving is $336, a pretty solid deal. After a few weeks of switching to the new company, they issue him a $20 statement credit for the current situation.
- Find Yourself a Pay-per-mile provider
If you are driving substantially less, you should look for usage-based car insurance companies. Digital Insurance Companies such as Metromile and Root promise to save 50% yearly for drivers who don’t travel too much.