Almost every state has minimum requirements for auto insurance. But it’s up to you whether to buy other types of insurance — such as collision and collision damage waivers. However, if you have a car loan, your lender will most likely require you to have both collision and collision coverage on your policy.

However, when you pay off your loan, you have options to lower your interest rate.

Will insurance premiums go down if I pay off my car?

Many people believe that once they pay off their car loan, their insurance premiums will drop. Generally speaking, this is true. But before you pay off the loan, the title or lien holder—usually a bank—may require standard collision insurance or comprehensive coverage.

Once you own your car, you are free to reduce the amount of this coverage or cancel the collision damage waiver and collision coverage entirely – thereby lowering your insurance premiums. It may also be cheaper to insure your car if it has depreciated in value. You can also improve your travel history to reduce fares.

How does comprehensive and comprehensive coverage affect my duties?

Collision Damage Waiver and Collision Damage Waiver are separate optional coverages that allow you to make a claim for damage to or total loss of your vehicle even if you were not at fault.

Accident insurance can protect your vehicle if:

  • You hit another car
  • Another car collided with your car
  • You accidentally roll over, overturn or roll over
  • You hit a stationary object, such as B, a tree

Comprehensive insurance protects your vehicle from:

  • theft and vandalism
  • shattered glass
  • Damage from thrown objects, such as B. falling boulders
  • hit animals
  • fire and flood
  • Damage caused by natural phenomena such as tornadoes

Almost every state requires some level of auto insurance, with the exception of New Hampshire and Virginia. In New Hampshire, you are not required to have auto insurance, but you do have a financial obligation to compensate anyone who is injured while driving. In Virginia, you can choose to have auto insurance, or you can choose to drive without insurance and pay the $500 Uninsured Motor Vehicle (UMV) fee.

However, since collision and comprehensive coverage are optional, adding them to your policy or the insurance company that requires this coverage will affect your insurance rates when you repay your loan.

How can I lower my car insurance premium?

Besides lowering your coverage or eliminating collision and collision damage waivers altogether, there are other ways to lower your auto insurance rates.

  • Crazy shopping. Marketplaces like Credible offer a way to explore insurance rates and plans in one place.
  • Pay a higher deductible. If you have an accident, you’ll pay more upfront, but if you choose to pay a higher deductible, your insurance premiums will be lower overall.
  • Bundled insurance policy. If you have home insurance from a company, ask them to bundle your auto insurance. Most insurance companies will give you a reduction on the total insurance cost. This also applies if you own more than one car or are a long-term customer.
  • Earn mileage discounts. If you drive less than standard miles per year, you can get a discount.
  • Maintain or improve your credit rating. Some insurance companies will lower your insurance costs if you maintain good credit or work hard to improve your credit.
  • Keep a clean driving record. Most insurance companies offer discounts for people with good driving records.
  • Check out other discounts. There are many other ways to lower your insurance costs, including maintaining good school grades, taking defensive driving classes, and adding security and anti-theft equipment to your vehicle.

Choosing new car insurance? Here are 6 types of insurance policies

There are 6 types of insurance to explore when deciding to buy new car insurance, change your insurance or find a new insurance company. Depending on your state’s mandated minimum benefits, some coverage will be required. But all of this is to protect you from financial loss in the event of an accident.

  • Liability Insurance. Liability insurance is mandatory in most states. It pays for damage to another vehicle, structure or personal injury if you are at fault.
  • Collision protection. Comprehensive insurance covers damage to your vehicle in the event of an accident. It does not include vehicles or objects that you might hit.
  • All covered. This insurance covers vehicle damage not caused by a collision, but by weather-related events such as hail or tornadoes.
  • Coverage of Medicare Payments. In the event of an accident, this insurance will help cover medical expenses incurred by you or your passengers.
  • Personal Injury Protection (PIP). Similar to health insurance, PIP insurance helps cover medical expenses or lost wages. This coverage is only available in certain states.
  • Uninsured and underinsured motorist insurance. These insurances help cover vehicle damage or medical expenses in the event of an accident and the other driver is uninsured or underinsured.
  • Gap insurance. Gap Coverage is optional coverage that pays the difference to replace a damaged or stolen vehicle.

Final thoughts

If you recently paid off your car loan, you can lower your interest rate by reducing or eliminating collision and collision damage forgiveness. There are other ways to lower your rates—by bundling your insurance policy, maintaining a clean driving record, increasing your deductible, and more.

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Jake Smith

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Jake Smith

He is the editor of Eragoncred. Previously, he was editor-in-chief of Eragoncred and a financial industry reporter. Jake has spent most of his career as a Digital Media journalist and has over 10 years of experience as a writer and editor.