Are you considering taking a break from driving and wondering, “Can I pause my car insurance?” It’s a question many car owners face, especially in times when their vehicle is not in regular use. Whether it’s due to an extended vacation, a sabbatical, or simply because you’re working from home more often, the idea of pausing car insurance to save money can be tempting. In this article, we’ll explore the realities and implications of putting your car insurance on hold, the alternatives available, and how insurance companies handle such requests. Understanding these factors is crucial in making an informed decision that keeps you both legally compliant and financially savvy.

What happens if you suspend your car insurance?

Putting your insurance policy on hold effectively freezes it without fully canceling it, helping you avoid a gap in coverage.

However, not all insurance providers offer the option to suspend coverage, and those that do may only permit it under specific circumstances. For example, if you’re facing an extended period of unemployment due to situations like the coronavirus pandemic, and you’re beyond the grace period or payment plan terms of your insurer, they might recommend suspending your coverage. But be aware, during the suspension, you will not have insurance coverage while you search for employment.

Only consider this option if you have alternative means of transportation. To stop the state-mandated auto coverage, you might need to submit an “affidavit of non-use” to your state’s department of motor vehicles. This form is a formal notification to the state that your vehicle will not be in use for a certain period.

Suspending your policy may not be feasible if you have financed your vehicle through a loan. Lenders typically insist on continuous coverage for risks like theft and vandalism.

Pros:

• While your car is not in use, you won’t incur insurance costs.
• Additionally, this approach usually avoids a coverage lapse, which could potentially lead to higher rates in the future.

Cons:

• If someone chooses to drive the vehicle, it will not have insurance coverage.
• The vehicle will also lack protection against incidents unrelated to driving, such as fire, damage from animals, vandalism, or theft.
• Generally, drivers who have car loans are not able to opt for this option.

Reducing Your Coverage as an Alternative

Reducing your coverage is a viable option if suspension isn’t possible for you, helping you avoid policy cancellation. This approach helps prevent labeling your coverage break as an insurance lapse, which often leads to higher rates in the future. However, it’s important to verify this with your insurance provider first.

Start by scaling down your auto insurance to the minimum required by your state. Liability insurance is a common requirement across most states, and some also require uninsured/underinsured motorist coverage, personal injury protection, or medical payments coverage.

If you’re planning to store your vehicle while not driving it, maintaining or adding comprehensive insurance is advisable. This coverage is beneficial in case your car sustains damage while in storage, as it covers scenarios like theft, vandalism, and damage from external factors like falling objects.

Typically, you purchase comprehensive insurance in conjunction with collision coverage. Nevertheless, your insurer might allow an exception, permitting you to hold a comprehensive-only policy, often referred to as “car storage insurance,” particularly if you’re storing your vehicle for an extended period. Remember, if you finance your vehicle, your lender might still require maintaining both comprehensive and collision coverage.

Inform your DMV if your insurer agrees to switch to comprehensive coverage only, dropping liability insurance. You might need to submit an affidavit of non-use if your car lacks sufficient insurance for legal driving

Pros:

• You won’t be spending on insurance that’s unnecessary while your car isn’t being used.
• There won’t be any lapse in coverage, which is important as it could lead to higher rates in the future.
• Maintaining comprehensive insurance protects your car from non-driving issues like fire, animal damage, vandalism, and theft.

Cons:

• If someone drives the car, its usability may be limited by the reduced coverage extent.
• You will incur costs for the portion of the insurance you choose to retain.
• Having a car loan typically necessitates maintaining specific types of coverage.

How do I cancel my insurance policy? (Not Recommended)

You might ponder terminating your auto insurance and obtaining a new policy when you’re ready to use your car again. But, similar to suspension, cancellation is likely not feasible if you have an auto loan, as your lender will usually require the vehicle to be insured to some extent.

If you’re considering cancellation, it’s important to communicate with your DMV. As with suspending your policy, you may need to file an affidavit of non-use in your state, acknowledging that the car will be off the road and exempt from mandatory insurance requirements.

The major drawback of canceling your insurance is the creation of a gap in your insurance history. Drivers who maintain continuous insurance coverage typically receive more favorable rates compared to those with gaps in their coverage, who might be deemed as “high-risk drivers.”

Remember, there’s no one-size-fits-all solution when it comes to insurance. Should you choose to maintain your coverage, a consistent payment record can assist in securing competitive rates in the future.

Pros:

• You won’t incur insurance costs while your car isn’t being used.
• You have the option to cancel your car insurance with any insurer.

Cons:

• If someone decides to drive the vehicle, it will lack insurance coverage.
• The vehicle won’t be covered against non-driving incidents like fire, animal damage, vandalism, or theft.
• Experiencing a lapse in coverage can lead to higher insurance rates in the future.
• Typically, drivers who have car loans cannot choose this option.