Whether you’ve been temporarily furloughed or permanently laid off, paying bills with no income is hard. You may feel like you’re playing a shell game, moving around what little money you have to keep the lights on.
In that context, your car insurance premium may seem like an expense you can trim back. And it can be, depending on your circumstances. Here’s a look at the right ways to cut your car insurance costs after losing your job.
Learn more: How does car insurance work? The basics explained.
Reducing your car insurance coverage to save money is a risky strategy. If you get hit by an uninsured driver or cause an accident with lower insurance protections, the move will cost more than it saves.
Still, there is a case for trimming back coverage if your new job status changes your driving habits temporarily. When you replace a long commute to the office with staying home, your accident risk is lower.
Learn more: How much car insurance do I need?
As a first step, evaluate how your driving has changed since you stopped working. You may not be going to the office, but if you replaced the commute with a daily trip to the gym, the net change may not warrant a coverage reduction. Ideally, you would only lower your insurance if you intend to reserve driving for emergencies. That means you have no daily commute, and you can run errands on foot, by bicycle, or by public transportation.
Before altering your policy, explore ways to save on the same coverages you currently have. Call your current insurance provider and ask about untapped discount opportunities, such as:
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Low-mileage discount. You may score a discount right away by reporting your lower mileage without the commute.
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Payment discounts. Some insurance providers offer discounts for paperless or automatic payments.
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Membership discounts. You may qualify for a discount by being a member of certain organizations, such as your alma mater’s alumni group or a military association.
Learn more: Car insurance discounts: 17 ways to save
It’s always wise to shop around: Gather three to five quotes from other insurance companies that mimic your existing policy. You may find that you’re paying more than you should, and you can save simply by switching providers.
Learn more: Best car insurance companies
If you decide that reducing coverage is the only way to go, pull up your last insurance policy renewal statement. It should list each of your coverages and their costs. Pay attention to your comprehensive and collision, rental car reimbursement, accident forgiveness, and roadside assistance coverages.
Comprehensive and collision
Comprehensive insurance and collision insurance help pay to repair your vehicle in different situations. Auto lenders usually require these protections, so you can only cancel this coverage if you have no auto loan.
Learn more: Cheapest car insurance in the U.S.
Eliminating comprehensive and collision provides the largest savings opportunity and the most risk. Averaging data from 19 carriers provided by Savvy Insurance Solutions, converting from a full coverage policy — which includes comprehensive and collision — to a liability-only policy saves an average of $77 a month, or nearly $1,000 per year. If you decide to spare yourself that expense, know that you’ll have to pay out of pocket to fix your car if you cause an accident. The same is true if your car gets stolen, vandalized, or damaged by a hailstorm.
If you must keep comprehensive and collision because you have an auto loan, you could alternatively raise your deductibles. Again, this is a risky strategy if you intend to continue driving. Changing your deductible from $500 to $2,000, for example, will lower your insurance costs, but it significantly raises your cash costs after an accident.
Learn more: What you need to know about car insurance deductibles
Rental car reimbursement helps pay for a rental car when your vehicle is being repaired after a covered accident. Often, if you cancel comprehensive and collision, you must also cancel rental car reimbursement.
Alternatively, you can keep the comprehensive and collision coverage and cancel the rental car benefit. Without a daily commute, it may be easier to manage without a car if yours ends up in the shop.
Accident forgiveness protection can be a free perk or a paid upgrade. If you’re paying for it, dropping this coverage is a savings opportunity — assuming you practice safe driving habits. Without accident forgiveness, your insurance company may raise your rates after an at-fault accident.
Learn more: Cheapest car insurance after one at-fault accident
Roadside assistance provides access to towing and breakdown services like battery jumpstarts and tire changes. If you don’t expect to drive much, your need for these services may also be reduced.
Tom Langford, co-owner at Automotive Instincts in Southern California, recommends evaluating the health of your vehicle before dropping roadside assistance. An older car that suddenly gets driven less may be more likely to break down — say, with a dead battery or flat tire. Langford recommends a once-annual inspection to check the age and conditions of the tires as well as the battery and charging system.
Langford also advised exploring options for free roadside assistance. “Some Napa-certified shops are enrolled in Technet, a nationwide roadside assistance program for their customers,” Langford explained. Continental Tire also provides three free years of roadside assistance for flat tires with its Total Confidence Plan.
“A good shop can help guide you to some programs that can save the expense of conventional roadside assistance plans while still providing peace of mind as well as a safety net in case of emergency,” Langford said.
Learn more: Car insurance rates are climbing. Here are 4 reasons why and 11 ways to save.
While you might get by temporarily without rental car reimbursement and roadside assistance, you cannot cancel your policy outright or carry less than the state’s required liability limits. A full policy cancellation will create a coverage gap, which insurance companies consider a risk flag. When you resume your car insurance, you may pay higher rates as a result.
Learn more: What happens if you don’t have car insurance?
You could reduce your liability limits, but not lower than your state’s requirements. But again, this move puts you at an elevated financial risk each time you get behind the wheel.
What if I lost my job and can’t pay car insurance?
Contact your car insurer before your premium is past due if you can’t afford the premiums. You may have to reduce coverage down to the state-required minimum, and then limit your driving to manage the risk.
You don’t need to inform your car insurance company of a lay-off or furlough, unless you are unable to pay the bill. If cash is tight, contact the insurance company and ask about your options for reducing costs.
Lowering your car insurance after being furloughed is a better option than letting the coverage expire or getting cancelled by the insurer. If you reduce your insurance coverage, do what you can to limit your driving also. You risk making a bad situation worse by getting into an accident with lesser protections.
Tim Manni edited this article.
Unless stated otherwise, the estimates above are provided by Savvy Insurance Solutions (“Savvy”). Savvy operates a marketplace for home and auto insurance, plus an agency licensed in all 50 states. Estimates are generated using Savvy’s in-house machine learning models based on over 3 million data points, and include more than 15 of the largest insurance companies in Savvy’s nationwide data set. This includes data from more than 2 million insurance accounts connected through Trellis Connect, an in-house technology allowing consumers to “link” their insurance accounts before searching for insurance, and tens of thousands of policies bound by Savvy’s own agents. It takes into account myriad factors to create predictions, such as:
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Policyholder age
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Number of vehicles
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ZIP code
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Vehicle age
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Insurer
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…and more
Savvy creates estimates by running models against multiple inputs to the parameters of interest. For instance, the “teen driver” estimates were created by adjusting the policyholder age input into the pricing model while keeping all other variables steady from the baseline for “full coverage.” The models enable hyper-personalized estimates that take into account a plethora of user attribute permutations (e.g., teen drivers in specific states, teen drivers with new vehicles, teen drivers in specific states with new vehicles) to provide individuals with a unique and tailored experience. The charts above are a subset of the kinds of personalization Savvy can do.
The following are definitions used by Savvy when providing its rate estimates for various types of coverage.
Full coverage car insurance. A policy with comprehensive, collision, and liability coverage.
Average policyholder. A 48-year-old driver who owns a 13-year-old vehicle and lives in an average-income ZIP code.
Senior driver. A 70-year-old policyholder with full coverage car insurance.
Good driver. Drivers across all coverage types, vehicle types, and locations who have no tickets, accidents or DUIs.
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