When money is tight, one of the first things we look to do is to shave off unnecessary expenses. Auto insurance is often overlooked because there are coverages (such as Bodily Injury and Property Damage liability, as well as Uninsured or Under-insured Motorist Liability) that are often required by the state you live in. However, there are a myriad of ways your auto insurance can cost less by opting out of optional coverage. Given certain circumstances, dropping collision, comprehensive, towing and labor, glass coverage, rental car and loan/lease, or GAP, coverage can save you money and lead to a more affordable auto insurance policy.
What are those money-saving circumstances? Consider collision and comprehensive coverage. Neither of these are required by law (though they might be required by a lienholder or lease). These coverage options are designed to help you pay for damage to your vehicle in the event of an accident or other covered loss. However, if your car is, for example, ten years old, and you already paid off the loan years ago, you might consider dropping one or both of these coverage options. Depending on your auto insurance rates, premium and your auto, dropping these options can mean significant savings.
Another coverage you can drop once your car is paid for and the title is in your hands is loan/lease or GAP coverage. When in force, this coverage offers you protection against total loss by paying the lienholder on your vehicle. This coverage will not reimburse you instead of the lienholder once your loan is paid off.
Do you subscribe to AAA or any program that provides roadside assistance or any other benefits to members? If so, you may be able to drop towing and labor coverage (also known as roadside assistance) and auto glass repair and replacement. Why pay for these coverage options twice? Sometimes cell phone carriers offer roadside assistance as well. Be sure to check the terms of coverage offered from each provider before opting out.
If public transportation networks suffice for your daily commute, or you participate in a carpool (or if you have no need to commute), maintaining rental car coverage on your auto insurance can be a waste of money. This coverage option is often confused–many consumers believe it covers you if you’re driving a rental car, but what it covers is the cost to rent a car, up to an amount you specify.
To recap, if you are in any of the following situations, you could be saving money each month by dropping full auto coverage:
– Your car is older and/or not in tip-top condition anymore
– Your lien/lease is paid for and you alone possess the title to your vehicle
– You’re a member of a program such as AAA or your cell phone provider offers auto coverage benefits such as roadside assistance
– You use public transportation or a carpool to get to work, or have no commute
Before you make any changes, be sure you read the fine print and understand the laws regarding automobile insurance in your state. Owning, driving and maintaining a car can be rife with unforeseen expenses–but you have control over your auto insurance premium. Instead of dreading the day it’s due, consider adjusting your coverage as described above. You may just be surprised at your savings by dropping full auto insurance coverage.
This is a guest post by Philip Taylor of PT Money: Personal Finance. Visit his blog to learn to make more, save more, and spend more wisely. See Philip’s latest review of the best 0% balance transfer credit cards.