When times are tough and budgets are stretched thin, many of us start looking for monthly expenses to cut back on or eliminate altogether.
Your car insurance premium may seem like a drag on your finances, but before you consider cancelling it, there are several risks and disadvantages that you’ll need to bear in mind. Let’s take a look at each one in detail.
Safe drivers need insurance too
Some car insurance customers take the decision to cancel their policies, basing it on the fact that they are good drivers. They drive safely and “don’t cause accidents”. Unfortunately, the roads are full of less-careful drivers who definitely do cause accidents – and if you’re involved in one, you’ll be glad you were insured.
Theft, fire, and hijacking are three events that can happen to the most careful of drivers – in fact, they are often just a case of bad luck. Car insurance will cover you financially if you’re a victim of vehicle-related crime.
It could end up costing you hundreds of thousands in damage claims
If you’re driving an uninsured vehicle and end up driving into another car, you’ll be held liable for the cost of repairing or replacing that vehicle – not to mention your own. This could result in costly lawsuits being brought against you by the other driver’s insurance company, with the final bill easily running into six figures.
If you’re financing your vehicle, you’ll be in breach of contract
Virtually every car financing agreement requires the owner to maintain a comprehensive car insurance policy while the outstanding amount is being paid off. If you cancel your car insurance, you’ll be violating the terms of your financing agreement – and that could result in you losing your vehicle altogether.
It could affect your premiums in the future
By staying insured and claiming rarely over the years, you’ll build a low insurance risk profile. In other words, your insurer will consider you a low risk and offer you better premiums as the years go by.
If you cancel your policies frequently, you may end up falling into a higher risk category. This could result in higher premiums, and it may even cause some insurance companies to refuse your applications in the future.
Whatever you decide to do, don’t just stop paying your insurance premium and assume that your insurer will simply “cancel the policy”. If your insurance company is forced to terminate your policy due to non-payment, you will need to declare this on your future applications and it could lower your chances of being approved
You don’t need to cancel your insurance to make it more affordable
Since the risks of cancelling your car insurance policy are so high, is there anything you can do to cover your vehicle while trimming your budget?
Rather than cancelling your policy, you’re better off reducing your cover amount or switching from a comprehensive policy to a third-party, fire and theft policy – especially if your vehicle is several years old and fully paid off.
If you’re looking to save on your car insurance policy, our consultants may be the ideal solution for you. For more information, contact us today.