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It’s the day you’ve been waiting for. You paid off your car. Congratulations!
As you enjoy the extra cash in your bank account, it may be a good time to take a look at another expense that impacts your budget: your auto insurance.
Now that you own your car, it’s reasonable to ask:
Once your car is paid off, you do have the option to remove some optional coverages – and that could lower your premium. However, it might still be good idea to keep them for financial protection after an accident. Remember, if you don’t have insurance, you can be stuck paying repair costs out of pocket.
Good news: When you’re with ERIE, you don’t have to go it alone. Your car insurance policy comes with your very own local insurance agent who can answer your questions, run the numbers and help you decide what’s best for your unique financial situation.
Here’s a guide to reassessing your coverage once you pay off your car.
Before you start cutting any type of coverage from your policy, find out about your state’s requirements for auto insurance. Your local ERIE agent can explain how things work where you live.
While you might be legally required to have coverages like personal injury protection or uninsured or underinsured motorist coverage in some states, they could be optional in others.
For a state-by-state list, check out this guide to state insurance requirements from the Insurance Information Institute.
Collision coverage helps you cover the costs of repairing or replacing your vehicle ‒ minus the deductible ‒ after it is damaged in an auto accident. It’s often required by lenders, but once you own the vehicle, it may be optional.
But the question about whether or not to drop collision coverage isn’t always an easy one to answer. Because even though your vehicle is paid off, it really comes down to your car and your circumstances. Here are a few questions you should ask yourself.
When you’re with ERIE, your local agent can help you talk through these questions and determine if dropping collision coverage makes sense for you.
Another coverage that’s optional after you pay off your vehicle loan is comprehensive coverage.
It helps you pay for vehicle damage that’s not caused by an auto accident. This includes things like:
As your car gets older, the overall replacement cost can be a factor in whether you want to continue with comprehensive coverage.
Quick tip: Here’s one measure offered by the Insurance Information Institute: Multiply your premium for comprehensive insurance by 10. If the value of the car is worth less than that total, it could be time to drop comprehensive coverage. Your local agent can help you run the numbers and make a judgement call.
When you’re paying on a car loan or a lease, your car may be valued for less than what you owe. So, if your car is totaled in an accident, gap insurance helps you pay off your loan or lease, minus the deductible.
Now that your vehicle is paid off, this coverage isn’t necessary anymore.
With your vehicle paid off in full, it’s time for your insurance agent to remove your auto lender’s name from your insurance policy. This is an important step to take, especially if you’re ever in an accident.
When it comes time for your insurance company to pay a claim, they’re obligated to issue a check to the name listed on the policy. When the information isn’t correct and your auto lender’s name is still on the policy, there’s typically a delay because they’ll need to stop the check or get it back before issuing another one.
So make that phone call today to avoid any hiccups down the road.
At ERIE, we know that life is all about balance. It’s finding that sweet spot between your budget and getting the protection you need.
When it comes to the type of auto insurance you should have, rest easy that you don’t have to figure it out on your own. Contact your local ERIE agent today. They can help you run the numbers and determine what’s best for your unique financial situation.
Haven’t heard of us? Erie Insurance started with humble beginnings in 1925 with a mission to emphasize customer service above all else. Though we’ve grown to reach the Fortune 500 list, we still haven’t lost the human touch.
Contact Kartsonas Agency, Inc. today to experience the ERIE difference for yourself.