Making your last car payment to the finance company is a great feeling. You fully own your car, and you get to lower your monthly expenses by the cost of your former car payment.
You may even want to lower the amount of car insurance you have on your car. If you do want to find a new policy or reduce the amount of coverage on your car, you can use a car insurance comparison tool to help you complete the task.
If you purchased GAP insurance along with your regular full coverage car insurance policy, you can cancel this coverage immediately.
GAP insurance only pays the difference between what your car is worth and what you owe on it at the time of a car accident that declares your car a total loss.
With your car paid off, you do not need this coverage because there is no gap between what your car is worth and what you owe. This means that is coverage would not pay out if you were to get into an accident that resulted in your car being totaled after you made your last payment.
Required Insurance if You have A Loan
While you had a car loan, your financial institution may have had requirements for the amount of car insurance you must carry while you are making payments. Typically, these requirements include having liability, comprehensive and collision.
- Liability – Liability car insurance is required for all drivers regardless of whether they own their vehicles, make loan payments or lease. This car insurance pays for the other driver if the policyholder caused the car accident or property damage.
- Collision – This pays for the damages and medical expenses of the policyholder when they are determined to have caused the accident.
- Comprehensive – Pays for damage to the vehicle that was not caused by an auto accident.
State-Required Car Insurance
Once your car is paid off, you are only required to carry a minimum amount of car insurance by your state. This type of auto insurance is often called state minimum car insurance, and it is the least expensive policy you can purchase.
However, it also offers the least amount of coverage and may leave you under-insured.
For example, the state minimum insurance requirements in Wisconsin dictate that you must have $10,000 in property damage, $25,000 for injuries to a single person and $50,000 for injuries to more than one person.
If the expenses of the accident surpass these amounts, you could be left to pay the remainder of the auto accident expenses from your own finances.
Your Car Insurance Options
When it comes to lowering your car insurance after your car is paid off, you have several options. You can keep what you have, raise your deductible, lower your coverage amounts or downgrade to liability only car insurance.
- Keep what you have – You may opt to keep the car insurance you have. This is a good option for drivers that can afford their current coverage and whose cars are still worth thousands of dollars.
- Raise Your Deductible – You can lower your car insurance premiums by raising your deductible. If you have a $100 deductible, consider raising it to $500. If you have a $500 deductible, consider raising it to $1,000, just make sure it is an amount you can always afford.
- Downgrade to Liability – Downgrading your full coverage policy to liability only can save you a bundle each month, but make sure you are informed as to what the policy does and does not cover. Remember, liability policies never cover you if you were the driver that caused the accident.
Shop for New Coverage
If you are not sure what to do about your car insurance, go ahead and shop around. This can be easily accomplished with the help of an auto insurance comparison tool. A comparison tool allows you to input your information in the solitude and privacy of your own home.
All you need to do is enter all of the applicable information for all the vehicles you wish to insure and all of the drivers you wish to cover. Then, you click the submit button.
While you wait, the tool searches every available policy that meets your criteria and your desires. Then, it returns the best results.
Once you have the results, you can read through the policies and review the prices to find the right policy for you and your family. It’s fast and convenient, and you can even pay for your new policy online.