Perhaps you’re going to be away for months and you’re planning on putting your car in storage, or maybe you have a fixer-upper sitting on blocks in your backyard. For whatever reason, you’ve decided that you won’t be driving your car for quite some time and you’re considering temporarily canceling or suspending your car insurance to save money on premium payments. Insurance isn’t only intended to protect you and your passengers, it’s also intended to protect pedestrians, other drivers, and property. And while suspending or canceling your policy may be an option, there are various issues to consider.
Suspending Your Car Insurance
Suspending coverage allows for you to “pause” your policy without canceling it, thus avoiding a coverage gap. In all likelihood, this may not be an option for you. First, if you’re leasing a vehicle or have a loan on a vehicle, it’s likely that your lessor or lender requires you to have a certain amount of coverage, and typically requires that you carry comprehensive and collision insurance. Secondly, many insurance carriers don’t allow for this option. Additionally, many states require your vehicle be insured, even if it isn’t being driven, so you’ll have to check with your DMV as well.
However, there are some exceptions. Some insurance companies let military members to suspend their coverage when they store their car for 30 days, but again, this varies by state. In Connecticut, for example, you must demonstrate that your vehicle will be stored where no one can access it. Some states, such as California, will require for you to file an Affidavit of Non-Use (ANU).
Canceling Your Car Insurance
As with suspending your insurance, if you’re leasing or have a loan on your vehicle, this is most likely not an option. If you own your vehicle, you might consider canceling your insurance policy and taking out a new policy when you’re ready to resume driving it. However, keep in mind this option comes with major drawbacks that could end up costing you more money in the long run. If you cancel your policy, you’ll be required to turn in your license plates with the state (you may also have to submit an ANU). This is going to create a gap in your insurance history, also known as a coverage gap. This may put you in a high-risk category which in turn could result in higher premiums when you reinstate your vehicle. You’ll also have to pay the DMV to re-register your vehicle and get new plates. If you’re seriously considering temporarily canceling your policy, it’s best to discuss this with your insurance agent to determine if the long-term ramifications will outweigh the temporary savings.
Temporarily canceling or suspending your car insurance comes with inherent risks. Primarily, your vehicle won’t be covered during that time period. There’s plenty of unexpected occurrences: floods, fire, theft, a friend or family member who drives your vehicle without your knowledge and gets into an accident (which would likely be deemed different than an auto theft, in terms of coverage), a tree falls on it, etc. Without coverages in place, you’ll be on your own for any damages.
There are, however, alternatives. One option is to drop specific coverages to save on premium payments. You may qualify for a low-mileage discount if your vehicle isn’t being driven. If you’re confident your vehicle will not be driven and no one can gain access to it, you might consider dropping collision but keeping comprehensive. You might also consider removing yourself as a driver of the vehicle, which could lower premiums. Keep in mind, you’ll need to add yourself back to the policy when you resume driving the vehicle, and a failure to do so could result in a denial of an insurance claim.
Temporarily canceling or suspending your car insurance is a rarity, depending on your state and carrier, but if your situation calls for it and it’s to your financial benefit, it could be worth it. Obviously, this will always depend on each person’s specific situation as well as their risk tolerance. We recommend you discuss this with your agent to weigh the pros and cons. And since you’re already considering insurance and savings, it may be a good opportunity to compare car insurance quotes with other carriers, as you may be able to reduce your premium by switching to another insurance company.