Should I Cancel, Suspend, or Reduce Car Insurance When I Don't Drive?

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You can save money by canceling or suspending your auto insurance when you’re not driving.
If you financed your car, most auto lenders will not allow you to cancel or suspend car insurance until the vehicle is paid for.
cancelling auto insurance can result in a gap in coverage that will increase your premiums later.
Your car is not protected from fire, theft, or other damage if you cancel or suspend insurance.
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Canceling or suspending your auto insurance saves money if you have a vehicle out of use.

Reading: What happens if you cancel insurance on a financed car

This has become more common during the lockdown with people who work remotely and don’t need to travel or drive as much as they used to, Snejina Zacharia, founder and CEO of insurify, told Business Insider. however, if you lease or are financing your car, your lender may require coverage, so you may not be able to completely cancel car insurance, even if you’re not driving.

Also, if canceling now means you’ll have a break in coverage, your premiums could be higher when you resume coverage in the future. If you’re temporarily not using your car, it may be better to reduce your coverage to the required minimum rather than cancel your auto insurance entirely.

How do I cancel my insurance policy?

If you’re financing your car, Zacharia says your auto lender may require both collision and comprehensive coverage until the loan is paid off. therefore, canceling is not an option if you are leasing or still paying for your car.

Otherwise, canceling your insurance is a simple process. call your insurance company or send written notice of your intent to cancel your insurance by a certain date. check with your insurance company if an email is enough notification to cancel.

Disadvantages of canceling car insurance

Even if you fully own your car and aren’t driving, you may not want to cancel. drawbacks include:

increase in premiums later. If you drop your auto insurance and later decide to get coverage, your premiums will go up for the gap in coverage during the time you were uninsured.
lack of coverage for events that may occur at home. Even if you plan to store your car in the garage, you’ll still need some form of coverage in case of theft, fire, or storm damage.
state requirements. States require some form of insurance coverage for vehicles. Unless the car is totaled, any vehicle still registered with your state’s Department of Motor Vehicles may still need coverage.

What is the difference between canceling and suspending coverage?

If you cancel your insurance, you have no coverage at all and you will have a lapse in coverage which can cause your premiums to go up if you need car insurance in the future.

If you suspend your coverage, pause your coverage and avoid having a gap in coverage. Unfortunately, your car is not covered in the event of theft, fire or other damage.

If you finance your car, your lender may not allow you to cancel or suspend your car insurance.

if non-use is temporary, reduce coverage rather than cancel

If you expect to return to driving in the near future, it’s best to cut back on additional coverage, such as roadside assistance. Contact your agent to get rid of coverage you won’t need due to lack of use and to see if you qualify for any discounts. Most auto insurance companies offered rebates and discounts due to the coronavirus pandemic.

zacharia says you may notice a lower premium if you lower your policy to the state minimum. plus, avoid having a lapse in coverage that could result in higher insurance costs in the future having a lapse in coverage that could result in higher insurance costs in the future.

explore pay per mile insurance

If you’re just driving less, Zacharia says some auto insurance companies offer pay-per-mile insurance. metromile, noblr and root are some of the best known pay-per-mile insurance companies on the market, using app-based telematics to track how much you drive to adjust your insurance cost depending on how much you drive.

Notice that not many traditional auto insurance companies offer pay-per-mile insurance, but some do offer discounts when they track your driving. Companies that offer some form of this include Esurance, Progressive, Nationwide, Allstate, Safeco, and State Farm.

If you’re not happy with your insurance provider, take a look at business insider’s picks for the best affordable auto insurance companies, where we consider not just price, but customer service ratings as well.

Ronda Lee is an Insurance Associate Editor at Personal Finance Insider covering life, auto, homeowners and renters insurance for consumers. she is also a licensed attorney who has practiced litigation and insurance defense.