Given that the majority of lenders today will usually require full-coverage insurance when you have financed your vehicle with them, it can be shocking the first month to find out how much extra money you have when your vehicle is paid off. When that happens, it is tempting to lower your insurance to the amount of coverage required by your state. However, before doing so, it is best to assess your current and immediate circumstances before making any major changes. Therefore, it is a good idea to allow for the following concerns when that situation arises.
Consider The Immediate Use Of The Car And Family
While it can be tempting to lower your insurance payment right after you get a clear title for your car, you should consider the driving records and needs of anyone else who currently or is expected to drive the car in the near future. For instance, if you paid off your car and you have a teenager who is leaving brochures about driving schools on the refrigerator, you might find that just changing some of the insurance details is a better long-term plan.
When you remember that 16-year-olds have the highest crash rates of any drivers, including drivers over the age of 80, it only makes sense to add extra insurance for a young driver. Since learning to drive can be a stressful, damaging experience to parents, teens, and the car, it may not be best to drop all of the seemingly unnecessary or optional car insurance right away.
Allow For The Issues In Your State
Even if you live alone and have a great driving record, if your friend occasionally borrows the car, it is worth talking with your insurance agent about the best way to protect yourself if they were in an accident while behind your wheel. Specifically, the comprehensive coverage that is usually required by lenders and not required by most states provides protection against hit-and-run drivers and uninsured motorists.
If you live in a state like Oklahoma, where in recent years, more than one out of four motorists drove without insurance, dropping your coverage to the amount required by the state could have a negative impact on your vehicle and lifestyle.
In conclusion, it is easy to assume that it is best to drop the amount of car insurance you currently have when you have the opportunity to do so after paying off the car. Therefore, before assuming that it makes sense to immediately reduce your policy, it is time to speak with your insurance agent about making changes that will work best for your lifestyle and needs.