The COVID-19 pandemic has created the biggest economic disaster in many years. The length and true outcomes of the pandemic aren’t known yet, but many people are losing their jobs and trying to cut costs as a result.
So far in the US alone, more than 36.5 million people have registered for unemployment in in March, April and May. Going from a flush economy to one where sixty percent of people are worried about how they can pay their household bills is a big fall.
With job losses, lock-down and a general fear of CV19, people are driving a lot less than they used to. There are reports that people are driving up to 58% less than before. A combination of less income and less car use has made people look at the giant paperweight in their driveway and consider cutting costs.
Don’t cancel your car insurance
While it might seem like a good idea for now, it could be a costly error that exposes you to some bigger problems in the future.
First, the obvious. Cancelling your car insurance means you have no cover if something happens. While you’re not driving your car as much, any time you take it out of the driveway, you’re opening yourself up to risk. And even leaving it in your driveway could be a problem, with a rise in car thefts hitting many parts of the world. If your car is damaged or stolen, you have no way of recovering funds.
Secondly, depending on your plan, you might not save that much. If you have a joint home-car-contents policy, there could be discounts applied for having everything with the one insurer. Removing the car insurance might mean removing that discount.
Thirdly, in some countries and states, insurance is a legal requirement. You could be prosecuted or face fines.
Finally, this could affect your insurance costs in the future. Insurers do offer discounts to long term customers, and terminating your policy is terminating the discounts. They will often query the coverage gap when applying for new insurance too.
Instead out outright cancelling your policy, there are other things you can do.
Contact your insurer
The Financial Conduct Authority has released guidelines for insurers in dealing with COVID-19 insurance problems. This governing body recognises that people are struggling financially and has urged insurers to take steps to assist people in remaining financially solvent and still be able to pay their insurance premiums.
Your insurer has a raft of options to hand to help make this more affordable to you. They can consider:
Payment plans: Some insurers are offering payment plans. Yours might be open to this.
Extended delivery coverage: If you’ve lost your job and have temporarily taken on being a delivery vehicle, your car should be subject to extra insurance. But some companies have loosened up on these rules, extending existing personal coverage to delivery driver coverage.
A premium ‘holiday’: Generally, if you miss a premium payment, the insurance company cancels the policy within a week or two. However, there are currently extended grace periods of up to two months. While the total owing will still remain the same, you have longer to come up with the funds- and you’re still covered in the interim.
Waiving late fees and penalties: If you missed a car insurance payment, you can express your financial problems and ask them to waive the fees.
Ask for a higher deductible: If you excess/ deductible is higher, your premiums are lower. Especially if you are using your car a lot less and it’s parked securely, this could be a good option in the short term.
Change the type of cover: If you have comprehensive insurance, consider dropping it back to third-party insurance. If your car isn’t worth much anyway, this could save some serious money.
As well as these options, there are also some discounts or temporary reductions available.
Pick up that phone and have a chat with your insurer. It’s the single best option available to you. And, you don’t know until you try.
Multi-policy discounts: As alluded to before, if you have all your insurance with one insurer, there can be huge discounts. Take a holistic look at all your insurance expenses. Home, contents, car, business, life, and health. If you haven’t already, can you bundle these up with one insurer? Go shopping and see who can offer the biggest savings. This could be anything from 5% to 25%.
Multi-car discounts: If you have more than one car, make sure they are insured with the same company. There could be savings of up to 25%.
New car discount: Some insurers offer a new-car discount, for any vehicles up to three years old.
Anti-theft discount: If your car has anti-theft devices and features, you could be eligible for this car insurance discount.
Good driver discount: If you’ve never had an accident, congratulations. You might be eligible for a wide range of discounts on your car insurance.
Do you belong to any professional organisations? Sometimes your job, associations and organisations that you belong to give you access to discounts. It’s worth asking your employer or groups you belong to.
Many of these policy options and savings won’t be mentioned to you, so make sure you’re prepared to ask for specifics.
Put some thought in and avoid cancelling insurance
Car accidents have dropped significantly due to the fact that fewer people are using their cars. Some insurers are offering lower premiums, discounts and credits as a result. If you are in financial distress, call your insurer, speak to them, and investigate every policy and every discount option. Most people are sympathetic and will try to help. Cancelling should be an absolute worst-case scenario, and to be avoided at all costs.