With many companies extending work-from-home policies through to next summer, you might no longer need your car for the commute. As the average household has nearly two cars, could you keep one in storage, and save money by cancelling the car insurance until you need it again?
Cancelling and “uncancelling” later
The obvious way to get a break from paying auto insurance if you’re not using your car is to cancel the insurance outright and then purchase it again later. However, this only works if you’re getting rid of the car. Cancelling—even temporarily—isn’t ideal, as your registered vehicle is typically legally required to carry insurance even if you’re not driving it, and you’ll be dinged with higher insurance rates later for having a lapse in coverage (up to a 29% increase according to ValuePenguin).
If you still use the car at all, you’ll want to keep it insured to stay legally and financially protected. On the other hand, if your car is safe in a garage and you have no intention of driving it, you still have options—although they depend on your insurer, so contact them directly to see which of these apply to you.
Pausing or suspending your insurance
Insurance companies rarely let customers pause coverage temporarily, but they might be willing to do so because of the pandemic. If they allow you to pause your insurance for hardship reasons, you’ll have to sign an “affidavit of non-use” and submit it to the DMV. Essentially, it means you’re declaring that you won’t use your car at all to both the state and your insurer. There’s one big catch, though: if you’re paying for the car through a loan, you probably won’t be allowed to suspend your payments or coverage.
Cancelling liability and collision insurance
This is a rare option, as most states require liability coverage. Liability covers damage or injury you cause with your car, and collision covers the damage to your car in the case of accidents on the road. Naturally, it’s difficult to injure someone or get into an accident if your vehicle is under a tarp in a garage, so some insurers may allow you to suspend these insurances. Your insurer will still require you to pay comprehensive insurance, however, which protects your car from theft, fire, or hail. This option is known as “car storage insurance.” (If you have a car loan, you still might have to pay for collision insurance).
Drop to liability coverage only
Basic liability coverage is the minimum standard for auto insurance and is required by law in most states. It’s possible to drop collision and comprehensive insurance, but again, only if you’re not driving your car at all. Plus, many lenders will make comprehensive and collision mandatory as part of your agreement. It’s a risky move, as without comprehensive coverage your car could be damaged by a flood or stolen and you’d have to eat those costs. Proceed with caution.
Switch to user-based insurance
You could switch to a user-based insurance, a newer form of coverage that determines your rates using a device in your vehicle that tracks how you drive. What’s nice about this option is that you can lower your premiums and still drive your car (unlike the previous options). In particular, shopping around for a pay-as-you-drive (PAYD) plan, which is based on miles driven and rewards people that barely use their car, can save you from 5-40% depending on the type of driver you are.