Stopping coverage for a short while may appear to be a good idea to save on premiums. Say you are going away for couple of months and you won’t be taking the vehicle out of its garage. Would it be wise to drop automobile insurance policy for that period? What would the consequences be, if any? Would you have any problems when you want to re-insure your car either with the same or another carrier? Let’s see if we going to economize or lose out.
Cancelling a policy is the natural outcome of selling an automobile. However, it is a bit different story when you are keeping it because you may need to contact local DMV and see if you need an “off road” certificate. If it doesn’t have liability it should not be kept on public roads. You should store it in a private location. Some states may require you to surrender the vehicle license plates when you give up compulsory liability until you get the coverage back. This is one point to check.
The second point is that you will probably be charged higher car insurance rates when you want to buy a new policy after dropping existing one a while ago. That is why it may be beneficial to maintain minimum provision while you are away to avoid the lapse. Most companies would offer great rates for such protection and accommodate your request. You may keep only fire and theft if the vehicle is garaged or you may have the liability as well depending on costs. This way, you wouldn’t need to deal with DMV as well, if you are not selling the automobile.
You will pay higher rates when you want to re-start previously stopped coverage. Keep a basic one to avoid a lapse, especially if the gap will not be long to accumulate enough premium savings to make it worthwhile.
You can read further on what happens if auto insurance lapses. One of the questions on proposal forms is to find out if you are covered currently. Companies are not keen on drivers who will keep canceling on them due to non-payment or anything else. They are looking for motorists who will pay premiums for a long time rather than dealing with the ones who will drop vehicle insurance coverage often.
This may be seen as having money shortage too and they don’t like policyholders with financial problems. That is why they check credit score and offer better rates for drivers with good score. Also, people with money problems tend to submit more claims than people who are rather well off. More and more underwriters are looking at various indicators to calculate the chance of a policyholder submitting a claim, staying long with the company or switching the moment a better quote is available.
In a way, they profile applicants and this affects quotes they offer. So, appearing to be different one way or another can be seen as problematic and result in price increase. Typical drivers are generally considered to be low risk and therefore get decent rates.