Most people want to reduce their car insurance costs as much as possible. This is understandable, especially if you live in a state like Florida or Texas where your annual policy may be well above $6,000. However, if you want to start dropping some parts of your insurance policy and leave only liability on your vehicle, then this may be a mistake. Keep reading to learn about a few situations where this is a bad idea.
You Still Have A Car Loan
If you have been finding it difficult to pay your hefty car insurance bills along with your monthly automotive loan, then you may want to drop some of your insurance to make the payments easier for you. However, you are required to place full insurance on your vehicle until the loan is paid in full. While some people believe that it is a state law that requires you to keep full insurance on a financed vehicle, this is not the case. Financing companies set this rule. Since the vehicle is owned by the finance company until it is paid off, they want to be as protected as possible from financial hardships. Full insurance policies are one way to protect themselves.
You do not want to drop any of your insurance if you still need to make car loan payments. You will violate your contract with the finance company if you do this. If you are in violation, then the finance company can terminate your loan and repossess your vehicle. Focus on making larger monthly payments to the loan company to pay off your car early. This way you can drop a portion of your insurance coverage once the car is paid off.
Your Car Is Worth Some Money
Many people want to drop their car insurance payments simply because they think they are paying too much. However, car insurance is meant to protect you from property loss, injuries, and lawsuits if an accident occurs. While there are many factors taken into consideration when determining your insurance rates, the monetary value of your car is one factor. If your car is worth more money, then your insurance rates will be higher. Specifically, you will pay more in insurance if it costs more to replace your car after a serious incident.
Look at your total car insurance payments throughout the year as well as the current blue book value of your car. If the insurance payments are far less than the total cost of your vehicle, then it is best to keep full coverage on your car. If you are paying above and beyond the value, then consider dropping either collision or comprehensive coverage. You will need to keep liability coverage though, since this is often a state requirement.
For more information, contact local professionals like Northeast Insurance Agency.