When Should You Alter Your Car Insurance Coverage?

Every driver needs to maintain an auto insurance policy to drive legally in Canada. But there are a few occasions when you might want to downgrade your auto insurance coverage. From having a risky teen driver on your policy to that prized, classic car, here’s when to decrease your insurance coverage — and when not to.

When it’s a good time to review your auto insurance

There are times when you should reduce your auto insurance premium, including if you reduce your commute or own an older vehicle you rarely drive. Here’s what you need to know.

You have a reduced commute

If you’ve cut back your hours at work or started carpooling, it might be time to reprice your auto insurance. Often, people will renew their auto insurance and not factor in that they’re using their vehicles less frequently. However, if you’re driving significantly less than before, keep track of your odometer.

An example

With your old job, you had a long commute and averaged 160 kilometres each week. Now, you use rideshare and have access to public transportation, commuting only about 25 kilometres weekly.

What to do

Ask your insurance provider about a discount, and if your current company doesn’t offer one, not to worry. You might be able to find discounts with other providers.

Shop online for an insurance company that offers discounts for:

  • Reduced driving if you move closer to work, take public transportation, or carpool
  • Reduced driving if you’re retiring or already retired and driving less frequently
  • Telematics and usage-based insurance policies to monitor your driving habits and annual kilometres

You have a new driver or teen driver on your policy

Adding a new driver or teen driver and their car to your policy is a good idea if you want to bundle your insurance. You can only add a vehicle to your policy if the car is registered in your name. However, the downside of having a young driver on your policy is that teens usually cost more to insure as their inexperience presents a higher risk to insurance companies.

An example

Your son is a new driver, and while you stress that he doesn’t speed, he’s received several speeding tickets, citations, or a DUI. Your son’s inexperience and high-risk driving behaviours make him challenging and costly to insure.

What to do

Instead of adding a teen or new driver to your policy, let them start their own coverage. If the rates look high, compare quotes online and look for ways to lower their insurance:

  • Have them take a government-approved driver’s education course, which includes defensive driving lessons
  • After a year of good driving, ask for a discount
  • If they have good grades, ask for a good student discount
  • When they turn 25, ask for a discount

You have antique cars or supercars you don’t drive every day

Your antique car collection or those supercars you’re storing in the garage might be raising your premium. And you might benefit from a change in coverage.

An example

You have an antique car and a restored car that you’ve been working on. You don’t drive them, and you’ve kept all the repair records on them.

What to do

If you don’t drive these cars every day, compare auto insurance providers specializing in classic cars or supercars.

Insurance companies specializing in antique cars or supercars may offer specific discounts and can help determine the exact amount of coverage you need. These insurance professionals are helpful if you need to file a damage claim, and they may also know about replacement parts for antiques or help with repair services.

You’ve saved up your deductible amount

This isn’t lowering your coverage, but it can lower your premium. If you have enough savings for your insurance deductible, you might consider raising your deductible amount to lower your monthly or annual rate.

An example

You have a $250 or $500 deductible and raise it to $1,000 because you have money saved to cover the deductible when filing a claim.

Why this works

Once you have enough savings to cover your deductible, contact your insurance company about raising your deductible amount. This will lower your monthly or annual premium. Raising your deductible from a $250 limit to $500 might lower your collision and comprehensive premiums by as much as 5%. If you raise your deductible to $1,000, it might reduce your collision and comprehensive rates by as much as 10 %.

Your vehicle is getting older, and you don’t drive it every day

Your full coverage insurance will likely include collision and comprehensive. But, if you’ve had your car or truck for several years, you might want to drop the comprehensive and collision coverage.

Comprehensive includes coverage for:

  • Fire, thefts, and vandalism
  • Damage if an animal (deer, moose) strikes your vehicle
  • Weather-related damage

Collision insurance will cover:

  • Damage to your vehicle caused by an at-fault collision
  • Damage caused to your vehicle by a hit-and-run collision

It might suffice only to have liability coverage for older vehicles you don’t use for your work commute. Factor in that if your vehicle sustains damage in a collision, the repair bill might be higher than the car’s current value.

An example

You have a car that’s approaching 321,868 kilometres. Your family doesn’t drive it often, and you only take it out on weekends to let the engine run. The car was damaged in a fender bender and will require extensive repairs.

What to do

Consider the vehicle’s value. If the actual value for your car or truck is lower than 10 times what you pay in insurance rates, it might be better to lower your coverage. If your vehicle is valued at $5,000, you have a $1,000 deductible, and a collision occurs, your insurance provider can only pay a maximum of $4,000. The remaining $1,000 is the deductible amount you would have to cover.

If your premium for collision is over $400 annually, it might be better to lower your coverage to liability. Hence, decreasing your coverage to just liability might save you a few hundred dollars or more on your policy.

When it’s NOT a good time to lower your auto insurance coverage

There are occasions when you might not want to reduce your coverage to liability alone. If you just paid off a vehicle or recently made a car your primary vehicle, here’s what you need to know.

You’ve paid off your vehicle

Some people will choose to lower their insurance coverage to liability-only once their vehicle is paid off. Maybe you have a clean driving record and don’t live in a high-risk area where there are a lot of damage claims from traffic collisions or animal crossings that contribute to collisions. But, if you switch to liability-only, will you have enough to cover damages?

An example

You have a vehicle that’s worth $40,000 after you’ve paid off your auto loan. You get in a collision that totals the vehicle. Will you have the full amount to replace it?

A suggestion, in this case, is that instead of dropping to a liability-only policy, keep your collision and comprehensive coverage and shop for cheaper insurance. You can’t predict if you’re going to have a collision. But, you can shop around for affordable rates you can lock in.

You have a new primary vehicle for your commute

Some people have three or four cars between them and their spouse. Say you have a vehicle that you only have liability coverage on. If you start driving that vehicle again for your daily commute, you might want to increase the coverage on it. Consider changing it back to include comprehensive and collision. That way, if you’re in a collision, you’ll have adequate coverage for any damages, injuries sustained, and property damage.

Other ways to save on insurance

If you auto-renew your policy every year, you might find that you’re missing out on insurance discounts. Maybe you haven’t been in a collision for several years. Or, you’ve taken a driving class.

Here are a few discounts you can ask your insurance provider about — and if they don’t offer these particular discounts, check online with another provider.

Insurance discounts:

  • A student that lives away from home
  • An anti-theft device
  • An energy-efficient vehicle
  • Being a valued customer over a long time frame
  • Bundled insurance (combining home and auto with the same insurance company)
  • A defensive driving class or driver’s education course for new drivers
  • Having a multi-vehicle policy
  • Having no car collisions or violations in three years
  • Maintaining a good credit report (depending on where you live, some insurance providers deem drivers as more responsible)
  • Maintaining good grades (for students)
  • Maintaining low annual kilometres
  • Raising a deductible
  • Telematics
  • Winter tires

Search for the best auto insurance rates

Your vehicle’s age, its value, and your commute are factors to consider when lowering your auto insurance coverage. With car collections, vehicles you don’t drive daily, and older vehicles, you might want liability-only coverage. But, if you’ve recently paid off your vehicle, it might be better to shop for discounted coverage as you can’t predict if a collision or damage will occur. Likewise, if you take a new or teen driver off your policy, this might lower your premium. And remember to comparison shop for insurance rates.

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