Can You Pay Less for Car Insurance if You’re Working at Home?
With many people working from home due to the COVID-19 pandemic, you may feel like you’re paying too much for car insurance. If you’re not driving to work every morning and you’re leaving the house less, your risk of getting into an accident is lower. Are you stuck in your current policy if your driving habits have changed? Not necessarily.
You may be able to adjust your policy if you’re driving less frequently while staying home more.1 If you feel like this applies to you, you may qualify for additional savings on your auto coverage.
Many car insurers have also issued refunds and discounts to policyholders who are driving less.
During this time of uncertainty, many understandably want to save as much money as possible. Using discounts, changing policies or exploring other options for your auto insurance may provide some financial relief. Here are some options to consider when looking for car insurance that best fits your current driving habits.
Low Mileage and Pleasure Use Policies
If you’re working at home, much of your driving may be considered “pleasure use,” such as shopping or the occasional road trip. Insurance companies consider a pleasure vehicle to be one with low annual mileage.2
Your insurer will rate the average number of miles you drive in a year as low, medium or high. Insurers are interested in how much you drive overall and how far you drive to and from work.3 The length of your commute can affect your insurance premiums.2 Someone who drives 30 miles to work, for instance, may pay more than their neighbor who only has a 5-mile commute.
Less than 7,500 miles is often considered to be low mileage, while 15,000 or more generally falls into the high mileage category.4 Definitions of low annual mileage can also vary, so you’ll want to check with individual insurers when shopping for coverage.3
Pay-Per-Mile Insurance
Another option for those who don’t drive much is a usage-based policy, also known as a pay-as-you-go4 or pay-per-mile5 policy.
You would start by paying a low monthly base fee.5 A digital device or app tracks the miles you drive, along with other information such as speed and risky maneuvers like hard braking.4 Your premium would vary each month based on the data collected.
Dropping Full Coverage Insurance
Most states require all drivers to carry liability insurance to cover damages to other drivers and their vehicles in the event of an accident.
Full coverage means purchasing the state-required liability insurance, plus collision and comprehensive coverage. Collision insurance pays for damage to your own vehicle in a crash, while comprehensive covers non-crash-related hazards such as theft, vandalism and storm damage.
You are likely required to have full coverage if you don’t own your vehicle outright, such as if you’re making payments on the car to a bank. If your car is fully paid off, you can choose whether to include collision and comprehensive in your policy. Here are some things to consider when deciding whether you need full coverage:
- Would you be comfortable covering the entire cost of repairs if your car were damaged?
- Could you afford to replace your car if it were lost or stolen?
- How old is your car? Full coverage is highly recommended for vehicles less than 10 years old.
- What is the value of your car? If the cost of comprehensive and collision coverage would equal 10% or more of the car’s value, you may want to consider opting out.6
Vehicles in Storage
What if you have a car that you’re no longer driving at all? Would it be okay to drop insurance altogether?
First off, remember there’s a difference between “rarely” and “never.” You must have your state’s required liability coverage to legally drive a car. So if you think you’ll still need the vehicle in case of emergency, or to run occasional errands, you’ll need to maintain at least the required minimum.5
Another question would be whether you own the car outright. Remember, a bank will require you to maintain coverage if you’re still making payments. Finally, you need to have a secure, private garage or other safe place to store the car while coverage is suspended.7
Still Have Questions About Your Car Insurance?
At The Resource Center, our insurance agents are here to help you find the best policy for your needs. If you find yourself driving less these days, it may be time to re-think your auto insurance. Contact us to learn more about your options!
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and The Resource Center are not affiliated companies. 757543-11/20
Sources:
1: https://www.thebalance.com/how-to-reduce-your-car-insurance-premium-while-working-from-home-5075585
3: https://www.insure.com/car-insurance/mileage-and-car-insurance-rates/
4: https://www.thezebra.com/auto-insurance/driver/other-factors/car-insurance-low-mileage-drivers/
5: https://www.autoinsurance.org/telecommuting-autoinsurance/
6: https://www.carinsurance.com/do-i-need-full-coverage.aspx
7: https://www.moneygeek.com/insurance/auto/suspend-lower-auto-insurance/
