When you’re trying to cut costs, where do you scale back?
“There’s no doubt that when times get tough, insurance is one of those things that tends to get left off first,” says Tim Bemis, assistant manager at Dupaco Insurance Services.
But dropping insurance coverage to (in theory) save money can prove to be a costly decision, sacrificing basic protection and more.
Here are three pitfalls to dropping that insurance policy:
- Higher premiums in the future: “When you get back on your feet and you want to go back to insurance, very few companies will take you without continuous insurance,” Bemis says. “And the ones that will, will charge you a higher premium.”
- Force-Placed Insurance: If there’s a loan on the vehicle, your lienholder will add Force-Placed Insurance to your vehicle. It protects the lienholder in the event of physical damage to your vehicle, but it does not include liability coverage. “Lienholders put that coverage on there, and they bill that back to you on top of the loan,” Bemis says. “And that coverage is very, very expensive.”
- Pricey tickets: If you get pulled over and the officer finds that your insurance has lapsed, you could face a ticket ranging anywhere from $500 to $800 – no small chunk of change.
“If you can’t afford the solution, which would be the insurance, you really can’t afford the problem, which would be the accident,” Bemis says.
What you can do
If it becomes difficult to squeeze insurance payments into your budget, contact your insurance agent and explain the situation.
There might be an easy solution, something as simple as raising your deductible.
At Dupaco, members have a variety of resources at their fingertips, Bemis says. The loan department might be able to roll those insurance premiums into the car loan. A free Money Makeover can help you review your entire budget to see how to make the payments affordable.
“At Dupaco, we have so many outlets to help members,” Bemis says. “We’d like to review the entire issue rather than jumping to just cutting coverage.”