Another 709,000 Americans filed for first-time unemployment benefits last week and millions remain unemployed. And for others, they have kept their jobs but have been forced to accept pay cuts and other reductions in benefits. Needless to say, the pandemic has caused chaos for many families’ budgets. Of course, if you have less money coming in, the natural reaction is to look for ways to save money. When the car insurance bill arrives in the mailbox, many people wonder about simply not paying it or slashing coverage. So, we wanted to offer some advice on these issues and remind you what is required under the law and, most likely, under your car loan or lease agreement.
First, let’s start with cancelling your car insurance. We do not recommend it for several reasons. First, Tennessee law requires drivers to carry the following coverage: $25,000/$50,000 limits for liability and $15,000 for property damage. If you are involved in an accident without these minimum limits, you could be found guilty of a Class A misdemeanor which carries penalties of up to a $2,500 fine and 11 months and 29 days in jail. Second, if you took out a loan to buy your car or you signed a lease for your vehicle, those agreements almost always require you to maintain comprehensive (this covers damage not arising from a car accident like theft or a tree falling on your car) and collision coverage (for when you collide with something whether it be another vehicle, a guardrail, a tree, etc.). Third, when this economic storm has passed and you seek to obtain insurance coverage again, you almost certainly will pay a higher premium because insurance companies do not like to see lapses in insurance coverage. Insurance companies view drivers who allow their insurance to lapse as riskier. Finally, if something happens to the vehicle or you cause injury to another, your financial situation is going to become a lot worse if you do not have insurance.
If you cannot afford your current coverage, you have several options. Right now, insurance companies are sensitive to the economic crisis befalling many American families so they are offering reduced rates for customers who are experiencing reduced hours, reduced salaries, unemployment or sickness. Reach out to your insurance company and see if you qualify for any reduction in rates. This is especially true if you have reduced the number of miles you typically drive. For instance, if you are now working from home whereas before the pandemic you were commuting 40 minutes each way, you may qualify for a reduction in rate.
Another possible way of reducing your insurance bill is to consider removing a vehicle from use. So in a two-vehicle-family, if everyone is working from home, reduce the coverage on one vehicle and stop using it and only use the vehicle that you keep fully covered. Again, talk to your insurance company and check your loan or lease documents to ensure you keep the coverage that is required.
Talk to your agent about other ways you might qualify for a reduction in your insurance bill. While there are not a lot of public transportation options in Middle Tennessee, there are some. So if you have started taking the bus to avoid paying for downtown parking or if you have decided to bike or walk to work, again, you might qualify for a reduction in your premium because you have reduced the number of miles you typically drive. (Of course, the converse is true. If you used to take the bus to work but are now driving in order to social distance, you might need to talk to your agent.)
Finally, before the pandemic, Tennessee was the 5th worst in the nation for the number of uninsured and underinsured drivers on our roadway. That number has surely increased as more people have made the hard decision to forego car insurance because of economic pressures. If you are one of the fortunate who is weathering this economic storm, it is time to take a careful look at your uninsured/underinsured (UM/UIM) coverages and make sure you have adequate protection. This coverage is not required by law in Tennessee so do not assume you have it. Many agents throw out the term “full-protection” but they are not including UM/UIM coverage. As we have mentioned in the past, this coverage is surprisingly affordable given the protection it provides. For more information on UM/UIM coverage, read more here.
If you would like to talk to one of our award-winning injury lawyers, simply give us a call. We offer a free, no-obligation consultation, and we handle all accident cases on a contingency basis, which means we only get paid if we recover money for you and your family.