Everyone is looking to save money on car insurance. It can be a hefty monthly expense getting in the way of other bills you may have, so saving money where you can is crucial. The good news is that owning a car can save you money on car insurance. You may not see an immediate or significant drop, however, so don’t count on paying off your vehicle to save on your auto insurance.
Changes in Requirements
The most prevalent change you may see is if the coverage on your vehicle changes. Having a loan on your car can often mean that a lender will require you to carry certain coverage on the vehicle in order to protect it and themselves in case of an accident.
Most lenders require full coverage auto insurance, which may include:
Comprehensive Coverage: Comprehensive coverage provides compensation for damages to the vehicle caused by fire, wind, hail, lightning, smoke, theft, vandalism and other incidents not involving collision.
Collision Coverage: Collision coverage provides compensation for damages to the vehicle caused by a collision with another vehicle or object.
Liability: Liability insurance covers bodily injury and property damage the driver may cause someone else while operating the insured vehicle.
Medical Payments Coverage: Medical payments coverage provides compensation for medical bills the driver and their passengers may face after an accident, no matter who is at fault.
Uninsured/Underinsured Motorist Coverage: This insurance covers damages incurred in an accident involving another driver who is not carrying insurance.
Roadside Assistance: This helps cover trip interruption expenses such as needing to be towed or running out of gas.
After you pay off your vehicle, you have the option to lower the amount of coverage on your vehicle. This isn’t always the best choice, however, as full coverage provides the greatest protection you can have. Speak with your insurance agent before changing or dropping insurance for your vehicle. Also keep in mind that each state requires drivers to legally carry certain insurance amounts, generally including bodily injury liability and property damage liability. You cannot drive without this insurance even after you pay off your vehicle.
Changing Value of Your Car
In some cases, owning a car can save you money simply by changing the value of the vehicle. As your vehicle grows older, it may grow less valuable depending on its make and model. As the vehicle lowers, so can the amount you pay for insurance to protect it.
Paying off your car can be a great relief, but make sure you still have enough coverage to protect yourself.