Money expert Clark Howard knows the ins and outs of auto insurance, having covered the industry for more than 30 years.
In this article, we’ll lay out your options for dropping or paring back insurance on a car you’ve parked — along with one big warning from Clark.
Here Are Your Insurance Options for a Car You’re Not Driving
If you won’t be driving your car for an extended period of time, you might be able to make some adjustments to your auto insurance policy.
However, your options will depend on your particular situation.
Options if You Owe Money on Your Vehicle
“First of all, if you have a loan on your vehicle — which most people do — you’re not allowed to drop coverage completely,” Clark says. “You have to talk to your lender and they may permit you, during a time where the vehicle isn’t being operated, to remove everything but comprehensive coverage.”
The lender has to know that it’s protected in case anything bad happens to your vehicle, even if it’s parked in your carport or driveway.
“You have to keep the comprehensive because if, say, a tree were to fall on the car or it was stolen, you’ve created a risk for the lender,” Clark says.
Still, you may be able to save some money by reducing your level of coverage. Talk to your lender about your options. You may be able to move to comprehensive-only coverage or comprehensive plus collision coverage for a vehicle you’re not driving.
You’ll also want to check with your state’s department of motor vehicles to see if you can still keep your vehicle registered even if you don’t have liability coverage.
If your lender allows, you may be able to move to comprehensive-only coverage on your vehicle if you’re not driving it. Comprehensive coverage protects you from things like fire, theft and weather-related damage. The rules for doing this vary from insurance company to insurance company.
Allstate, for example, says, “If you have a car that will be kept in storage for 30 days or more, you may be able to suspend your liability and collision coverages, which are both driving-related and, instead, maintain only comprehensive coverage on the car while it’s in storage.”
But there are potential dangers.
If you or anyone else takes the car out of storage for even a trip to the grocery store, you could put yourself at risk both legally and financially. On the legal side, you could be charged for operating your vehicle with insufficient insurance. As far as your finances go, you would be personally liable if you caused an accident or otherwise damaged someone else’s property while you were driving the car.
Comprehensive Plus Collision Coverage
Again, if you still owe money on your car, your lender will likely require you to carry both comprehensive and collision coverage. The collision coverage protects the lender if your car is damaged by coming in contact with another vehicle or an object like a tree.
Even with comprehensive plus collision, you still shouldn’t drive your car for any reason since you won’t have the liability coverage that would protect you if you damage someone else’s vehicle or property.
Options if You Own Your Car Free and Clear
If you own your car outright, you have another option: You can completely drop coverage on a vehicle you’re not driving. However, there are some important things to consider before you take this step.
“You have to be aware that very few people can just straight up stop auto insurance without repercussions, either from the insurance companies or from the states,” Clark says. “If you are in the position where you own the vehicle free and clear, you have to make sure in your state you’re not required to turn in your tags or plates in order to not have insurance.”
Clark says that in Florida — where he’s a part-time resident — if the state gets notice that you don’t have insurance on your vehicle, you have to take your plates to the state’s motor vehicle department and turn them in. That means that you won’t be able to drive the car legally until you reinstate the insurance.
But that’s not the only reason to think twice before dropping your coverage entirely.
Why You Probably Don’t Want to Cancel Your Car Insurance, Even if You’re Not Driving
Getting rid of your auto insurance completely in the short term can have longer-term repercussions.
“If you go without auto insurance for a lengthy period of time, you’re only going to be able to go to what’s known as a nonstandard insurer when you need insurance again,” Clark says. “That’s the lowest category of insurer that provides really crummy coverage at a really high cost.”
So, if you’re currently with what’s known as a preferred insurer — most of the well-known companies — you probably don’t want to lose your ability to keep your auto insurance with them.
“Keeping minimal coverage with your insurer — which, again, you can only do if you own your car free and clear — where you buy only state minimum coverage, that’s your best choice,” Clark says.
If you’re looking to save money on car insurance while you’re not driving your car, there are options. The key is to make sure you understand what’s required by your loan company and your state. Weigh your options carefully before making any changes to avoid setting yourself up for bigger costs down the road.