There are a wide variety of reasons auto owners put vehicles in storage: changing seasons, extended travel, military deployment, college, changes in employment, classic auto restoration, mechanical breakdown, and the list goes on.
It would seem logical to cancel coverage on a vehicle that isn’t being driven in effort to cut back on spending, but are you sure? Before canceling your coverage, there are some factors one must consider.
- DO YOU HAVE OTHER VEHICLES INSURED?
While canceling a policy to save premiums on a vehicle that is in storage may seem like the financially sensible thing to do, canceling a policy completely may result in a gap in coverage, resulting in higher premiums when you reinstate your policy. One factor insurance companies look at in determining rates, is whether you have had continuous insurance coverage on the vehicles you own, and if you haven’t, you may be placed in a higher risk category, with higher base rates. It may, however be an effective means of saving money if you have other vehicles on your policy that you continue to maintain coverage on.
- WHERE IS THE VEHICLE BEING STORED?
Perhaps you’re subletting your apartment and putting your vehicle in a commercial storage unit for six months while you travel abroad. The likelihood of damage in a secure unit may be slim, but suppose you’re storing a vehicle for the winter in the empty bay of your garage. If a shelving unit with paint fell on your car, causing a need for dent and paint repair. Without auto insurance in place, you would have to pay for those expenses out of pocket.
- DO YOU HAVE A LOAN ON YOUR VEHICLE?
If you owe money on your vehicle, it is likely that your loan agreement states that you must maintain insurance on your vehicle throughout the life of the loan. There are instances (such as military deployment) where a lender may allow you to reduce coverage if your vehicle is stored per their requirements, however it is important to visit with your personal banker or lending authority before doing so.
- DOES THE STATE YOUR VEHICLE IS REGISTERED IN REQUIRE LIABILITY INSURANCE?
Some states require proof of liability insurance to register a vehicle. In these states, insurance companies must report the coverages carried on all registered vehicles. Failure to comply with such state laws may result in a citation or suspension of your driver’s license.
- HOW LONG WILL THE VEHICLE BE IN STORAGE?
Some insurance companies offer reduced, seasonal coverage of a vehicle in storage; however, they limit the amount of time that you can keep that reduced coverage in force (typically six months). It is important to visit with your insurance agent to determine any rules that may apply to your policy.
- WHEN YOU TAKE YOUR VEHICLE OUT OF STORAGE, WILL YOU REMEMBER TO REINSTATE COVERAGE?
Failure to reinstate coverage upon removing a vehicle from storage may be costly. Suppose you are involved in an accident where damages are involved. Without insurance coverage in place, you will be left to cover those expenses out of pocket. Likewise, if you are pulled over during a routine traffic stop for a tail light that has burned out; failure to produce proof of insurance can result not only in a hefty fine, but points on your driving record that will ultimately result in a surcharge on your insurance policy for 3-5 years, in most states.
After doing some homework, you may find that canceling all coverage on your vehicle may not be possible or feasible for you, however, there may be another option to reduce your insurance costs while your vehicle is in storage. Depending on your circumstances, it may be possible to reduce your coverage from “full coverage” to comprehensive only. Comprehensive (often referred to as comp or Other than Collision) coverage insures your vehicle in the event of physical damage resulting from “acts of God” including: severe weather, fire, theft, vandalism, flood, glass damage, falling objects/missiles and birds or animals. This coverage is considered acceptable to some lenders if your vehicle must be placed in storage, provided certain criteria are met. This type of coverage also protects you from damages that may result out of circumstances beyond your control such as flood, fire, theft or vandalism that may occur where your vehicle is stored. Comp coverage is subject to deductible and does not cover your liability.
A final consideration to make when deciding whether to maintain insurance while your vehicle is in storage is, its value. The “10% rule” states that if the annual cost of full coverage auto insurance is more than 10% of the replacement cost value that you would receive from your insurance company at the time of a loss, it may be worth reducing coverage. This rule is not etched in stone and you should never reduce coverage if you cannot afford to repair or replace your vehicle or if you have a loan against it.
As you take the convertible out for one more rip around the block before winter, it might be worth stopping by your insurance agent’s office to discuss the possibility of reducing or canceling coverage over the winter and how your insurance company can protect you in the event of a loss while your vehicle is in storage.