Paying for vehicle insurance while on vacation is a little like paying for heating your home while away.
When you go on vacation and leave your vehicle behind, it seems a waste to pay for insurance during that period. After all, if the vehicle will be sitting in your garage or driveway, there’s little reason to worry about an accident. Paying for vehicle insurance while on vacation is a little like paying for heating your home while away.
While going on vacation during the winter months, you probably don’t want to leave the heater on 75 or 80 degrees. If no one is home, why heat the place to that toasty temperature? If you have pets, you need to keep the thermostat up to a certain level. Barring animal health concerns, you can turn the thermostat down while you’re away and save a bundle; however, you wouldn’t want to shut the heat off. Your pipes could freeze, leaving you with an unpleasant surprise upon your return home that will cost you a lot more than a heating bill. A reasonable solution would be to leave the thermostat at 60 degrees. It’s not a comfortable living temperature, but it will keep your pipes unfrozen.
Just like you want to turn your heater down but not off, you may want to reduce your car insurance coverage but you wouldn’t want to cancel it. A cancelled policy means you have no coverage. Though you may not be there to drive the vehicle, it could still be stolen, vandalized, or damaged in a fire. If your car is worth very little money, you may be willing to take that risk, but, for most car owners, lacking insurance would lead to a devastating loss if their vehicle was stolen or destroyed.
If you have a car loan, you are still responsible for the balance, even if the car is destroyed in a fire or winds up in the local underworld chop shop. As far as the bank is concerned, it’s your tough luck. You should have kept your insurance, the bank representatives will say. No one wants to be without a car and still owe the bank thousands or tens of thousands of dollars.
For this reason, placing your insurance on hold would not be a good idea. Nonetheless, as with turning down the thermostat while you’re away, there are some temporary changes you can make to your policy in order to save.
Reducing your coverage
If you’re going away for a short time, it may not be worth it to reduce your coverage. Also, you may need your policy if you plan to rent a vehicle. The insurance available through rental agencies is outrageously expensive, so you won’t save money by reducing your own coverage if you’re going to rent a vehicle. Also, remember that if you decide on the spur of the moment that you need to rent a vehicle, you’ll have to go through the hassle of getting your coverage back to its old level.
If you know a rental vehicle isn’t in the cards and you are going be to away for weeks, months, or longer, then reducing your coverage makes sense. It only takes a phone call and most insurance companies will allow you to specify the date that you want your old coverage level back, which makes the process easy.
As explained by Nerdwallet, reducing coverage provides several benefits. First, you’ll retain the comprehensive part of your policy. Comprehensive insurance covers theft, vandalism, and fire damage. It is also far less expensive than collision, so you’ll still save a lot but won’t have to worry about having no coverage if the local theft syndicate sees your disused car as an easy target.
You’ll want to cancel your collision coverage because you won’t be causing any accidents while you’re away. This works so long as no one else will need to drive the vehicle. If someone does and your collision is suspended, that can mean a big ticket or a nasty lawsuit if there is an accident.
Check state requirements
As pointed out in an article on CarInsurance.com, you need to make sure that you fulfill all state insurance requirements. Though you will not be operating the vehicle, the state may still require some form of insurance. For example, some states require you to carry liability insurance unless you deactivate the registration—something that’s not worth it unless you are going to be gone for an extended period. Before you alter your coverage, check the requirements with your DMV. Using an auto insurance comparison tool from www.carinsurancecheap.net can be an excellent way of finding affordable car insurance online
Lienholder requirements
How much you can reduce your coverage depends on whether the vehicle is financed. If it is, you may face restrictions because of the lien. For example, the bank may require that you carry coverage of at least the state minimum for liability, collision, and comprehensive. The best thing to do before altering your coverage is to check with your lienholder. If you have no lienholder, then you can reduce your coverage by whatever amount state law allows.
When should you cancel a policy
As explained on DMV.org, you cannot cancel an insurance policy if you still have a lienholder. If your vehicle is paid off, you are still legally obligated to carry liability insurance in all 50 states. However, if you won’t be driving the vehicle on the street, you can legally cancel the policy. Some states require that you also cancel your registration and turn in your license plates if you cancel coverage. If you have an old car and won’t be driving it for a year, it may be worth going through this exercise.
When cancelling the policy, make sure to inform the insurance company that you are cancelling because the vehicle won’t be in operation. You want to avoid a policy lapse. A gap in coverage means you will face higher insurance rates later. Also, canceling stops the insurance company from continuing to bill you. If they continue to bill you and you just don’t pay, the policy will cancel for nonpayment. This will count as a lapse and could result in higher rates down the line.
An extended vacation is great. If you’re going away for a long time, reducing your insurance coverage makes sense. It is important to keep insurance for financed vehicles and to comply with all state insurance regulations.
