Your insurance company will love it if you want to pay off your car insurance early. What you likely haven’t thought of before, is that it actually costs your insurance company money to accept monthly payments from you. An insurance company has to pay bank fees the same as you do. This means that the faster you pay your insurance company, the fewer bank fees they have to pay. Insurance companies aren’t just happy about lower bank fees though, they have a much lower risk when they already have your money in their pockets. You would likely be surprised how many customers miss monthly insurance payments.

Is It Possible To Have Paid Off Car Insurance?

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Yes, it is possible to have completely paid off your car insurance. This means no monthly bills and no more worrying about missing a car insurance payment. However, there is still one thing that you have to worry about, even if you pay off your car insurance. If you happen to be in an accident, you still are going to have to pay for your insurance deductible to cover any claims. The amount of your insurance deductible depends on the amount of coverage you have and what you discussed with your insurance provider. However, the minimum deductible you are likely going to have to pay to make a claim is $500.

How Can I Pay Off My Car Insurance Early?

It is very easy to pay off your car insurance early. Simply call up your car insurance company and they should be able to send the details on how they want to be paid. Different car insurance companies like to be paid in different ways. However, if you have something like automatic withdrawals, your car insurance provider might just be able to take that money out of your account with your permission. Otherwise, your insurance provider should be able to inform you about a way to pay them earlier for your insurance.

How Can I Pay Off My Car Loan Early?

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Paying off a car loan is actually different than that of paying off car insurance. With a car insurance policy, the business is trying to make money, so they are happy to take your money early. With a car loan, your loan provider does not get paid for the vehicle that you purchased. The car loan provider only gets paid the interest that is added on top of the loan. Due to this reason, there can actually be penalties for paying off your car loan early. It is best to contact your car loan provider for details, but sometimes it just isn’t worth it to pay off a car loan early.

How Much Can I Save By Paying Off My Car Loan Early?

Unfortunately, even though it is nice to have your car loan paid off, you don’t save money on car insurance without doing anything. Your rates will actually stay the exact same as before you paid off your car loan. However, at least you no longer have to make car loan payments, which can help you to save some money. The one way you might be able to save money by paying off your car loan early is by decreasing your insurance coverage. Sometimes financing companies require a certain amount of insurance to sell you the vehicle. When this is the case, decreasing or removing that coverage from your policy can save you some money.

What Is Gap Insurance Coverage And Can I Drop That After Paying Off My Car Loan?

If you no longer have a car loan and are paying for gap insurance, you can definitely drop it. Gap insurance is a type of insurance offered by car manufacturers that covers you for the difference between your car loan and your car’s actual value. Gap insurance can actually be fairly expensive depending on the value of your vehicle and how much it has depreciated. If you have driven a lot of kilometers or gotten into an accident, your gap insurance could be costing you a lot of money. You will benefit from dropping this insurance coverage after you have paid off your car loan.

Should I Pay off My Car Early so I don’t Need Full Coverage?

This can be a very tough decision to make, especially if you have other debts and obligations. The best way to decide if it is worth it is to calculate the amount of money you are going to save. It is also a good idea to calculate your current expenses. Make sure you can afford to pay off your car insurance early and afford your other obligations at the same time. Dropping coverage isn’t always the best idea. Cars that have loans on them are still relatively new and probably worth some money. You will have to decide your risk tolerance and then make an educated decision.

If I Paid Off My Car Insurance, What Happens If I Leave My Insurance Company?

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When you pay off your car insurance, you are paying for your car insurance in the future. If you decide that you want to leave your insurance company, you are not going to be stuck paying all of that money all over again to a different insurance provider. Insurance providers are legally obligated to give you some kind of a refund when you leave. However, the amount of the refund can range quite a bit. It will depend on things like cancellation fees and how long you have left on your insurance policy. Generally, you will be able to get the majority of the money back that you have given to your insurance company for insurance that you haven’t used yet.

To Conclude

Paying off your car insurance early is a great feeling. However, you should always keep in the back of your mind that you might have to pay for an insurance deductible at some point in time. It isn’t always worth it to pay off your car insurance early if you need the money. Car loans and other monthly obligations are also important. Make sure that you aren’t financially straining yourself too much by paying off your insurance early. You don’t want to be struggling financially and then be hit with having to pay for an insurance deductible. This can be tragic and may leave you high and dry without any vehicle at all.

Resources:

https://pocketsense.com/car-insurance-decrease-car-paid-off-12854.html
http://ask.metafilter.com/270784/Should-I-pay-off-my-car-early-so-I-dont-need-full-coverage-insurance
https://www.payoff.com/life/money/6-ways-to-pay-off-your-car-loan-early/
https://www.reddit.com/r/personalfinance/comments/43u9vn/what_happens_to_car_insurance_rates_after_the/