Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.
Canceling or suspending your car insurance saves money if you have an out-of-use vehicle.
This has become more common during quarantine with people working remotely and not needing to commute or even drive as much as they used to, Snejina Zacharia, founder and CEO of Insurify, told Business Insider. However, if you lease or are financing your car, your lender may require coverage — so you can’t completely cancel car insurance, even if you aren’t driving.
Also, if canceling now means you will have a lapse in coverage, your premiums could be more expensive when you resume coverage in the future. If you are temporarily not using your car, it may be better to reduce your coverage to the minimum required instead of canceling your car insurance entirely.
If you are financing your car, Zacharia says your auto lender may require both collision and comprehensive coverage until the loan is paid off. Therefore, canceling isn’t an option if you are leasing or still paying off your car.
Otherwise, canceling your insurance is a simple process. You call your insurance company or send written notification of your intent to cancel your insurance on a certain date. Check with your insurance company on whether an email is sufficient notification to cancel.
Even if you own your car completely and you aren’t driving, you still might not want to cancel. Drawbacks include:
- Increased premiums later on. If you cancel your car insurance and later decide to get coverage, your premiums will increase for the lapse in coverage during the time you were uninsured.
- Lack of coverage for events that can happen at home. Even if you plan to store your car in the garage, you will still need some type of coverage in case of theft, fire, or storm damage.
- State requirements. States require some type of insurance coverage for vehicles. Unless the car is totaled, any vehicle still registered with your state’s department of motor vehicles may still need coverage.
What is the difference between canceling and suspending coverage?
If you cancel your insurance, you have no coverage at all and will have a lapse in coverage that can cause increased premiums if you need car insurance down the line.
If you suspend your coverage, it pauses your coverage and avoids having a lapse in coverage. Unfortunately, your car isn’t covered in the event of theft, fire, or other damage.
If you finance your car, your lender may not allow you to cancel or suspend your car insurance.
If you expect to go back to driving in the near future, it is better to reduce extra coverage like roadside assistance. Contact your agent about getting rid of coverage you will not need due to non-use and to see if you qualify for any discounts. Most car insurance companies offered rebates and discounts due to the coronavirus pandemic.
Zacharia says you may notice a lower premium if you pare down your policy to the state minimum. Also, you prevent yourself from having a lapse in coverage that could result in higher insurance costs in the future from having a lapse in coverage that could result in higher insurance costs in the future.
If you are simply driving less, Zacharia says that some car insurance companies offer pay-per-mile insurance. Metromile, Noblr, and Root are some of the most well-known pay-per-mile insurance companies on the market, which use app-based telematics to track how much you drive to adjust your insurance cost depending on how much you drive.
She noted not many traditional car insurance companies provide pay-per-mile insurance, but some offer discounts by tracking your driving. Companies that offer some form of this include Esurance, Progressive, Nationwide, Allstate, Safeco, and State Farm.
If you are unhappy with your insurance provider, take a look at Business Insider’s picks for the best affordable auto insurance companies, in which we consider not only price, but customer service rankings as well.
Ronda Lee is an associate editor for insurance at Personal Finance Insider covering life, auto, homeowners, and renters insurance for consumers. She is also a licensed attorney who practiced litigation and insurance defense.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.
Business Insider may receive a commission from Media Alpha when you click on auto insurance quotes, but our reporting and recommendations are always independent and objective.