Coronavirus Outbreak: What Can I Do With My Car Insurance?

Financial constraints stemming from the coronavirus are forcing many to consider reducing or eliminating car insurance coverage.

By now, the harsh effects of the coronavirus pandemic are coming into focus. In addition to the serious health risks of COVID-19, the financial toll the outbreak is taking across the United States and the rest of the world is massive. Unemployment is skyrocketing, and many people are finding it difficult to makes ends meet. Reduction of expenses is becoming more and more crucial, and one of the first sacrifices could be car insurance coverage.

Depending on your situation, tweaking your policy could be a good idea. But any changes should be made only after careful consideration of the potential consequences. You might also consider ways to reduce your car insurance costs without resorting to reduced coverage.

Option #1: Negotiating With Your Car Insurance Company

This is the easiest way to reduce your car insurance costs, and there are many different ways to go about asking for a lower rate. Not all of these suggestions will work, but it can't hurt to try.

First, simply ask for lower premiums. This will usually require calling your car insurance company directly and speaking with an agent, or perhaps getting the process started via email or online chat. Either way, explaining your financial situation and raising the prospect of switching insurance companies could result in a lower rate. The insurance company is motivated to keep you as a customer, after all.

Second, if you have different insurance policies with different insurance companies, see if you can get a discount for bundling all of your coverage (car, homeowner's, etc.) with one company.

Third, ask about other ways to reduce your premiums. Car insurance companies might offer a number of different discounts, including:

  • military
  • good student
  • good driver
  • antitheft devices
  • good credit score
  • pay-in-full, and
  • automatic pay.

Given the effects of the coronavirus, one of the most relevant discounts might be the low-mileage discount. More than likely, thanks to shelter-in-place orders and other government-issued mandates, you're driving far less now than you were before the coronavirus pandemic. So it may make sense to figure out how much less you anticipate driving over the next few months, and inform your car insurance company of any significant reduction in mileage. It's quite possible you'll reach a certain threshold that results in lower premiums.

Option #2: Change Your Insurance Coverage or Benefits

In addition to asking for lower rates or discounts, adjusting insurance coverage can sometimes lower your premiums. The question is whether the loss or reduction in coverage is worth the savings.

For example, one option is to raise your deductible. A deductible is the out-of-pocket cost you pay for a covered loss before your car insurance coverage kicks in—after a car accident, for example.

If your deductible is low, say around $500, one of the most effective ways to lower your monthly premiums is to raise your deductible to a higher amount, such as $1,500 or $2,000. But this assumes you have enough cash on hand to pay the extra amount following an accident, or you're willing to take the financial risk.

Next, there's eliminating certain types of coverage. In addition to base coverage for liability and bodily injury, car insurance companies are more than happy to sell add-on coverage, such as comprehensive, collision, and uninsured/underinsured motorist (UIM) coverage. These are nice coverages to have, especially UIM. Given the potential for an increase in uninsured drivers in the wake of the coronavirus pandemic, and with many drivers choosing state minimum coverage even in good financial times, it's good to have an add-on that will still pay for your injuries or vehicle damage if you're hit by a driver with no (or not enough) car insurance coverage. Learn more about what happens if you're in a car accident and the other driver doesn't have insurance.

In contrast, depending on the condition of your vehicle, it may not make sense to continue paying for collision coverage. For instance, if your car is worth less than the sum of your deductible plus your coverage costs, then there's little benefit to having collision coverage.

You might also be able to enroll in a usage-based car insurance program, in which a car insurance company monitors your driving habits and gives a discount for good driving habits or low-mileage driving. Some car insurance companies will even calculate premiums under a base fee plus a certain rate for each mile driven.

Option #3: Go Without Car Insurance

This is an option, but it's not a smart one. Realistically, you should only cancel your car insurance coverage if you've decided to stop driving altogether.

If you decide to stop driving and cancel coverage, remember that you may need to surrender your license plates. Otherwise, state authorities may hold you liable for driving without car insurance. This can occur even if you don't drive your vehicle. That's because some states will assume that if your vehicle has valid tags, the vehicle is being driven. And as you can imagine, it's very hard to prove a negative.

If you end up canceling your insurance but continue to drive your vehicle, you'll be in violation of your state's laws, and you could face civil and criminal penalties, especially if you get into an accident. Then there's the financial side of things. If you get into a car accident and you're not insured, but you're at fault for the crash, you'll be on the hook for the losses of anyone else who's injured or who incurs vehicle damage.

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