Q & A: Now that I’ve paid off my car, do I need to update my insurance?
Q: Now that I’ve paid off my car, do I need to update my insurance?
The Marble Answer:
Congratulations, you’ve paid off your car! That’s no easy feat. Now that you no longer have to make monthly payments, you may be wondering if there are other ways to save, specifically when it comes to your insurance (that’s sort of our thing, after all).
First things first, you should remove the lienholder. A lien is a claim against assets, often filed by lenders who otherwise have very little leverage should you stop making payments. This means that if the bank repossesses your property, or — crucially for our purposes — you’re in a car accident and there is an insurance claim, the lienholder (aka the lender) would get paid back first. But since you’ve now paid everything off, you’ll want to alert your insurance company that there is no longer a lien on your car. Some providers may want to see proof.
This step is crucial: if you have an accident, you’ll want any insurance payout to be sent to you and not to the financing company.
After this, you can reassess your coverage — but just because you’ve paid off your car doesn’t mean you can get rid of your insurance! Almost every state requires car insurance, and the only two that don’t — New Hampshire and Virginia — still have coverage mandates. That said, paying off your car loan may mean that you can reduce the type of coverage you have. For instance, It’s possible to drop the collision and comprehensive coverages, which are typically required by the lienholder — but that may not be wise. Removing these means accepting more financial responsibility should you have a collision or comprehensive claim. That said, if you determine that the vehicle is worth less than the premium… go ahead and roll those dice!
And as we like to remind our Marble members, shopping around is the easiest way to ensure you’re not leaving money on the table every month. So now that you own your car free and clear, take a few minutes to compare different policies and pricing. And don’t forget to enjoy the ride!