Car insurance is a product that few people think about beyond the context of paying their annual premiums. As a result, many people neglect to adjust their policies as their circumstances change. That neglect can lead to costly problems if they cause an accident.
Several life events warrant taking a close look at your auto insurance policy. Each one may cause a shift in your financial status. Failing to update your coverage amounts and the types of insurance included on your policy can expose you and your family to considerable financial risk. Read on to learn how four major life events can change your car insurance needs.
#1 – Buying A Home
Your home is likely to be one of your largest assets. Like other assets, it needs to be protected from liability claims. That’s the purpose of auto insurance. It protects you from liability stemming from an at-fault collision.
When you purchase a home, it’s important to update your policy’s liability coverage. It should reflect the amount of equity you have in your home. Otherwise, a claim or judgment could result in its loss.
#2 – Your Teenager Starts To Drive
Data show that teen drivers tend to cause more accidents per capita than their older counterparts. That’s one of the reasons insurers charge them higher rates. Teen drivers pose a greater risk.
Adding your teenager to your policy will increase your premiums. That’s a good time to adjust your policy to lessen the financial impact. For example, raise your deductibles. Drop your comprehensive and collision coverages. Ask your insurer whether you qualify for select discounts.
Reevaluate your policy when your teen begins to drive. Doing so may reveal simple ways to save money on your premiums.
On the other hand, reducing your liability coverage is not a recommended way to reduce premiums when adding a teen driver. You may even want to increase your liability coverage, or add an umbrella policy to help protect you against the risk of a liability claim from an auto accident.
#3 – Getting A Divorce
Car insurance is likely to be one of the furthest things from your mind if you’re going through a divorce. But neglecting to update your policy can set the stage for serious problems in the future. For example, suppose you forget to remove your spouse from your policy. If he or she causes an accident, your assets may be subject to liability claims.
If you and your spouse plan to end your marriage, update your car insurance policy. Remove your spouse’s name from it. Adjust your coverage amounts to reflect your new financial situation. If your spouse intends to remove you from his or her policy, be sure to establish a new one prior to your removal. Failure to do so may make it difficult for you to obtain coverage.
It is also important to make sure the automobile policy is issued in the name of the spouse that is on the title of the car. You should not remove your spouse’s car from your policy if your name is still on the title.
#4 – Retiring From The Workforce
Retirement prompts many people to downsize their lives. For example, if they own multiple vehicles, they sell them. If they own large homes, they list them for sale and search for smaller ones. Many new retirees relocate to enjoy better weather.
If you plan to make similar changes following your retirement, reassess your car insurance policy. Selling major assets, such as a vehicle or house, calls for reducing your coverage amounts. Such changes might also justify dropping certain types of coverage altogether.
Your insurance needs will change throughout your life. Make certain that your auto insurance policy is updated to accommodate them. Doing so will ensure that you and your family remain protected from liability claims.