When you pay off your car loan, feel free to celebrate! This is a major milestone. After devoting anywhere from 24 months to 84 months to such a large expense, no longer having that bill is quite a welcome relief.
And you can give yourself an extra reason to celebrate this event. Contact your insurance company and see the ways you can reduce your premiums with your new status. But don’t just focus on car insurance policy changes directly related to paying off your car loan.
There is a long list of discounts you owe it to yourself to explore. Most insurance companies make it fairly easy to look into them.
State Farm does this the best with their Discount Double Check program. What does discount double check mean? This program can help you save up to 40 percent on your car insurance rates.
What Happens When You Pay Off Your Car Loan
Obviously, you no longer have that monthly outlay for your car or possibly your child’s car. Did you know that these days, a car loan is one of the things parents of millennials are likely to pay for?
But you need to know what else actually happens when you pay your car loan off. Here are a few specific things that come with this financial milestone.
#1 – Your Car Title is Yours
Luckily, getting your car title takes virtually no effort on your part. After you make your last payment to the bank (or dealership), you will receive your title in the mail.
If you don’t receive your title in a few weeks, contact the bank that had your car loan to find out when you will receive it. If more time passes without receiving your title, then get in touch with your local DMV.
Your car title is important for your records, and it is needed for selling your car. Additionally, it can be used as collateral when you apply for credit.
#2 – Your Finances Have Some Flexibility
The urge is understandable to now see that car loan money as “play money.” You can treat yourself a little bit, but try to be smart. Don’t spend money just because you have it. You can reevaluate your budget and use these funds wisely.
First, think of your car. Yes, your loan is checked off, but there will always be gas, regular maintenance, the possibility of repairs, and the cost of any modifications you may wish to make.
You may even want to think ahead to your next car. If you save money, you can get a smaller car loan or perhaps you won’t even need a car loan at all.
Second, think of your car insurance. Having extra money put away can lower your insurance rates even more. You’ll be able to be better prepared for those unexpected costs if you save now.
#3 – Your Insurance Policy Needs Updated
Your initial contact with your car insurance company is to share the news that you paid off your loan. You need to do this in order for the lien holder to be removed from your policy, but you don’t need to wait until you have the title in hand.
This first step with your insurance company is essential. Without it, if your vehicle was totaled, the insurance payment would go to the lender named on your policy, not you.
Review Your Car Insurance for a Paid Off Vehicle
While there are common car insurance milestones you can benefit from like turning 25, getting married, and retiring, truly owning your own vehicle can be another one.
#1 – Check Collision and Comprehensive Coverage
Most lenders require additional insurance beyond the state-required minimum collision, which pays for vehicle damage caused by crashes and comprehensive, which pays for damages not related to an accident such as theft, falling tree, or a deer running into the road.
Check the car insurance requirements in your state. You may be able to drop collision and comprehensive coverage when you have fulfilled your loan responsibilities. If you can, just take into account that if you get into an accident, you may be responsible for covering repair costs or a new vehicle.
Shortly after your car is paid off, you may want to review whether to drop or not. Again, dropping this coverage is easier to do the bigger your emergency fund is.
#2 – Update Your Deductible
Now that you have a few hundred dollars extra a month, perhaps you can put all or a portion of that into savings, raise your deductible, and lower your car insurance rate.
If you are required to retain your collision and comprehensive coverage or if you choose to do so, you can save on your premium costs by raising your deductible.Since you’re accepting more risk, that gives your insurance company less risk, so they pass that savings on to you.
Just make sure you can afford to do it.
The deductible is the amount of money you will pay out-of-pocket when you make a claim. So if you are raising your deductible, have that extra amount of money in reserve so you’re not in trouble in the event of an accident.
Keep Saving with Discounts on Car Insurance
When you review your coverage with your insurance company, also ask them about all of the discounts they offer.
Common Car Insurance Discounts
Some common car insurance discounts include:
- Multi-Policy – If you bundle your home insurance policy and auto insurance policy with one provider, you could save up to 20 percent on insurance rates.
- Multi-Car – You will have a cheaper rate if you insure all of your vehicles together rather than individually.
- Good Driver – This discount is usually for every driver who has been accident-free for a period of three to five years.
- Good Student – Good grades ( usually a 3.0 grade point average) can translate to being rewarded with a discount.
Hidden Car Insurance Discounts
Don’t be shy in asking about these additional discounts:
- Defensive Driving – Find classes in your area
- Military – active and veterans
- Group Affiliations – employment, service, or membership
- Occupations – nurses and doctors, first responders, and federal employees
- Car Safety Features – extra airbags, anti-lock brakes, anti-theft
- Customer Loyalty – staying with the same insurance provider
Compare Car Insurance to Save
Shop around for car insurance at least annually. You may be happy with the changes already made to your car insurance just from now owning your car.
But check out at least a few other companies, and don’t just compare rate quotes. Check into their financial and consumer ratings as well. Seeing if you can do better with another company is another tip on how to save on your auto insurance once you’ve paid off your car loan.