Auto Insurance: Can You Pause Coverage?

If you're going away for a while and won't be driving, you might be wondering if you can pause your car insurance. While you can't legally freeze your car insurance, you may be able to suspend or reduce your coverage, depending on your insurer and the state you live in. Some states require ongoing coverage, so it's important to check the requirements of your state.

If you're not driving your vehicle for an extended period, you can consider reducing your coverage to comprehensive-only insurance, also known as storage or seasonal insurance. This will protect your vehicle from damages not related to an auto accident, such as damage from falling items or bad weather. However, you won't be covered for accidents, and you'll be personally responsible for any liability costs if you drive without liability insurance.

Alternatively, you can explore other options to lower your insurance costs, such as removing add-ons, switching to a higher deductible, or removing yourself from a shared insurance plan if you're the only one not driving. Remember, it's crucial to consult your insurance provider before making any changes to your policy.

Reducing your coverage

Reducing your auto insurance coverage is a good way to save money if you have an out-of-use vehicle. Here are some things to keep in mind:

Know the Minimum Requirements

Almost every state requires liability insurance, and some mandate uninsured/underinsured motorist coverage, personal injury protection, and/or medical payments coverage. You can reduce your auto insurance to these minimum car insurance requirements.

Keep Comprehensive Insurance

Consider keeping comprehensive insurance (or adding it) if you are storing your vehicle for a long period. Comprehensive insurance covers non-driving problems such as fire, animal damage, vandalism, and theft. It is also known as "car storage insurance." If you have a car loan, your lender may require you to keep both comprehensive and collision coverage.

Contact Your DMV

If you decide to keep only comprehensive insurance and drop liability insurance, you may need to file an "affidavit of non-use" with your state's DMV. This is because your car would no longer have enough insurance for anyone to drive it legally.

Avoid a Coverage Lapse

Weigh the Pros and Cons

While reducing your coverage can provide financial relief, it's important to consider the potential drawbacks. The vehicle might not be usable if you scale back coverage too much. Additionally, you will still have to pay for the insurance you keep, and there may be potential cancellation fees if you reinstate your full coverage.

Suspending your coverage

You can suspend your coverage if you won't be driving your vehicle for a while and don't need coverage. This option is available to you if you are:

• Putting your car in long-term storage
• Travelling or deployed abroad for an extended period of time
• Unable to drive due to an illness, injury, or a suspended license
• Waiting on car repairs

How to suspend your coverage

Pros of suspending your coverage

• Lower auto insurance premiums
• Avoid an insurance lapse that can lead to higher premiums in the future
• Can keep comprehensive coverage to protect from damage
• May be able to pause for long periods

Cons of suspending your coverage

• No protection if you drive without coverage in place
• Might be against lender or lessor policy
• Insurance options may not allow it
• State law might prohibit it

Cancelling your coverage

Cancelling your car insurance coverage is a simple process, but there are a few things to keep in mind. Firstly, if you are switching insurance providers, it is important to avoid a lapse in coverage by ensuring that your new policy is in effect when the old one is cancelled. You can do this by purchasing a new policy before cancelling your old one and having the start date of your new policy match the intended cancellation date of the old policy.

Secondly, if you are selling your car, you should maintain coverage until the sale is complete and the title is transferred to the new owner. In some states, you may also need to submit a Notice of Release of Liability to your state's Department of Motor Vehicles. Even if you are not driving your car, most states require you to have at least the minimum coverage, and cancelling your insurance too soon can result in fines and even suspension of your license.

Thirdly, when cancelling your car insurance, you may be eligible for a refund if you had paid for your coverage in advance. However, you may also be subject to a cancellation fee, which is typically a flat fee of under $100 or around 10% to 15% of the remaining policy premium.

Finally, it is important to note that cancelling your car insurance should be a last resort. There are several other options to consider if you are looking to save money on your premiums, such as reducing your coverage, suspending your coverage, or removing yourself from a policy temporarily. Cancelling your coverage will likely result in a lapse in coverage, which can lead to higher rates in the future.

Removing yourself from the policy

If you're going away and won't be driving your car, removing yourself from the policy is an option to explore. This is especially worth considering if you're on a shared policy and other members will continue to drive as usual. By taking yourself off the policy, you avoid paying for coverage you don't need, and the remaining members can continue to use the car. However, you won't be able to drive the car once you've been removed from the policy.

• Proof of Change: Depending on your insurance company, you may need to provide proof that you no longer live with the policyholder or have access to drive their vehicle. This could include proof of a change of residence or a statement confirming that you won't be driving the vehicle.
• Policy Requirements: Some insurance companies require all drivers listed at the same address to be included on the policy or be specifically excluded. Check with your insurer to understand their specific requirements.
• Impact on Rates: Removing yourself from the policy may result in lower rates if you are a riskier driver than the other policy members. However, if your driving record is better than that of the other drivers, your removal could lead to higher rates for the remaining policyholders.
• Reinstatement: Remember to add yourself back to the policy when you return and are ready to drive again. There may be a requirement to be listed on the policy if you live at the same address as the policyholder.
• Alternative Options: Before removing yourself from the policy, consider other alternatives, such as reducing your coverage, switching to a higher deductible, or removing optional add-ons from your policy to lower your insurance costs.

Switching to a usage-based policy

While you cannot pause your auto insurance, you can reduce your limits or drop liability coverage if you don't plan on driving for a while. One option to consider is switching to a usage-based policy.

Usage-based insurance, sometimes abbreviated as UBI, calculates the price you pay for auto insurance based on how you actually use your car. The policies are generally opt-in, but there are some insurance companies that specialize entirely in usage-based auto insurance.

Usage-based insurance is ideal for people who don't drive that often or too far, or those who are considered low-mileage drivers. If you drive 10,000 miles or less each year, you fall into this category. Usage-based insurance is also a good fit for safe or careful drivers.

With usage-based insurance, insurance companies can gauge how safely you drive and set an appropriate rate or offer discounts on car insurance. If you drive safely and don't drive that often, you should pay less based on the lower risk.

Usage-based insurance can be fairer for drivers because it focuses on factors that they can influence. It gives drivers more control over their rates. For example, if you're a great driver with poor credit, a flat rate from a traditional insurance company could hurt your rate.

In addition, usage-based insurance can help you become a smarter, safer driver by making you more aware of your driving habits like your speed, braking, cell phone use, and travelling at night.

If you're considering switching to a usage-based policy, you can take a free trial before you buy.

Frequently asked questions