Is car insurance cheaper if you own the car?
It can be! While the cost of your insurance policy won’t automatically decrease once you’ve made your last payment, you’ll have the option to decrease your coverage, which lowers your car insurance rates.
But before you contact your insurance company and tell them to cut your coverage down to the minimum for your newly paid-off car, there are a few things that you need to consider first!
What to do when you pay off your car
First of all, congratulations! Paying off a car is quite an achievement, so pat yourself on the back and get ready to enjoy a life without car payments. As previously mentioned, your car insurance premiums won’t drop simply because you own your car free and clear, but it does mean that you are free to explore other coverage options.
But before you make any changes, there are a few things to do first:
But how do you know what coverage to keep and what to drop? It depends on a lot of factors, like your car, your finances, your risk factors, and your level of comfort. Make sure to talk to your insurance agent to figure out what’s best for you, but here are a few general guidelines.
When to reduce your car insurance coverage
Deciding if you want to reduce your car insurance coverage primarily depends on your finances and your car’s value. It may be okay to drop full coverage for your car if:
But generally speaking, it’s a good idea to keep the additional coverage for a newly paid-off car. Take your specific circumstances into account when making your decision. If you live in an area with a high rate of car theft and vandalism, keeping your comprehensive coverage makes a lot of sense.
And unless you're ready, willing, and able to pay out of pocket for any damages to your car that occur in the event of an accident, it’s a wise choice to keep your collision coverage, too. Other scenarios where you’d want to retain a full coverage policy include:
How to find the best insurance costs