Auto Insurance Policy Modification

Almost every major life event will have a profound effect on your auto insurance policy, which is why periodic modifications are critical. As your life changes, so should your car insurance policy. Events like marriage, divorce, and becoming a senior citizen are just a few of the situations that call for coverage modifications. We’ll tell you when and how you should modify your car insurance coverage in what follows.

Major Life Events

Almost any time your life changes in a significant way, it’s a good idea to review your existing auto insurance policy to ensure that it still meets your needs. Here are the events that might warranty policy modifications:

• Marriage: when you tie the knot, you and your spouse can typically save money by putting your names on the same policy. Contact both of your current car insurance providers and request a quote for a policy with both of your names on it. Choose the policy that offers the lowest premiums and the most coverage and cancel the other. If you frequently drive each other’s cars, make sure both of your names are listed as authorized drivers on every vehicle you own.
• Death: if you lose a spouse or partner, you may become the only insured driver in your household, which will affect your premiums. Contact your insurer as soon as possible after the death occurs to remove the deceased from your policy.
• Retirement: typically, when policyholders retire, they reach the age at which they qualify for a senior-citizen car insurance discount. Once you retire or reach this age (as set by your carrier), verify that you are receiving the discount on your policy. At retirement, you probably will also drive less, which means you may also qualify for a low-mileage discount. Ask your insurer about the eligibility requirements.
• Divorce: in the event of a divorce, you may have to remove a driver and one or more vehicles from your auto policy. You may want to shop around with other carriers to try to find your own policy for more reasonable premiums.
• Adult children: when your child turns 18 and/or goes off to college, you will have to make a decision about whether to have him/her get an individual policy or continue to keep the adult child on your policy. Most carriers allow children to stay on their parents’ policy as long as they are in school until they reach age 25. If you keep your college student on your policy, he/she can qualify for a good student discount car insurance with a high enough GPA.

Financial Hardship

If you experience financial hardship to the point that you cannot pay your auto insurance premiums, the best thing for your credit and your future premiums is to alter your policy to include only the bare minimum amount of coverage. For instance, if you carry full coverage car insurance, you might drop comprehensive coverage and collision coverage and reduce your liability limits to the legal minimum. If your premiums still are not within your budget, consider canceling your policy and finding another mode of transportation for the time being. Remember, though, that lapses in auto insurance coverage will raise your premiums on future policies.

Vehicle Repossession

Typically, lenders repossess vehicles when borrowers stop making payments as agreed. However, lenders can also repossess your vehicle if you do not have car insurance or do not have adequate car insurance coverage. If your vehicle is repossessed, you will need to make up all of the past due payments and provide proof of current insurance. In other words, do not cancel your policy if you wish to get your vehicle back as soon as possible. However, if you cannot make up the payments relatively quickly, you should cancel your policy when your vehicle is repossessed.

Military

If you are on active military duty, you cannot exactly pause your car insurance policy, but you do have two other options. When you are called to active duty, you can put your car in storage and drop all coverages except comprehensive to protect it from any incidental damage. Your policy will become far more affordable, and you won’t have any gaps in coverage that can lead to higher rates down the road.

The other option available to military personnel in some states is to cancel their car insurance policies completely while they on active duty. How this will affect your future auto insurance rates will depend on where you live. More than 25 states have laws in place that prohibit auto insurers from penalizing returning members of the military with inflated premiums due to lapses in coverage.

Changes in Ownership

When you purchase a new vehicle and do not notify your current carrier, depending on where you live, the vehicle may still be covered for 14-30 days. However, you cannot still have your old vehicle, and the new vehicle cannot have been purchased for business purposes. With new cars, it’s best to notify your carrier right away of the purchase and cancel the coverage on your old vehicle.

If a vehicle is not new and is simply changing hands, the rules are slightly different. Usually, and again depending on where you live, you have 14-30 days to notify your insurer from the day the vehicle’s title is signed over to you. That only applies to drivers who are getting rid of their currently insured vehicle for another. If, on the other hand, the vehicle changing hands is your first car, you will obviously need to purchase a car insurance policy before taking ownership. Likewise, if you intend to hang on to your current vehicle, you will need to add the new vehicle to your policy as soon as you take ownership.