Congratulations- You paid off your car!!!
Paying off your car is a great thing. Getting out of debt is fantastic, good job! You own that car free and clear. There are usually some questions and concerns that come with this milestone. Some of these questions deal with insurance.
Can I Remove Full Coverage?
Usually the next thing that people do after paying off their car is they call their insurance agent, and they say, “Hey, can I remove full coverage from my insurance for my car, because I no longer owe anything on it?”
The answer is it depends, and it really depends on you and your financial situation. Something to understand- You’re not carrying full coverage on your vehicle to satisfy the bank. Really, the reason you have insurance in general is in the case that something happens, in this case to your car, the insurance takes care of it, causing you minimal financial stress. In other words, who cares if you have a loan or not!!! Don’t base your insurance decisions off of what a bank or financial institution says.
Questions To Ask Yourself
Ask yourself this question- “If something happens to my vehicle, am I financially prepared to either
A make repairs on my vehicle or,
B completely replace my vehicle?
If the answer to that is, “No. I have no money in the bank. If something happened to my car, I would be out of luck,” then your answer is you need to keep full coverage on your vehicle.
That way if something does happen, your financial hit is only your deductible, whether that’s $250, $500, or $1,000. But if you don’t carry those comprehensive and collision deductibles and something happens to your vehicle, you’re just out of luck, and if you have no savings, no money, too bad.
So, ask yourself that question. Am I financially prepared to either repair or replace my vehicle? If the answer is yes, you can consider removing full coverage from your vehicle. If the answer is no, keep it on.