Now that I’ve paid off my car, can I lower my auto insurance coverage?

It depends. When you finance or lease a car your  lender or leasing company will usually require auto owners to hold a minimum amount of auto insurance coverage.  Typically they will require you to hold more than the minimum personal liability limits and in addition, they may also require you to carry comprehensive and collision coverage. (Comp and collision pay for damages to your vehicle in the event you are involved in an accident with an object on the roadway or if your vehicle is stolen or damaged.)

After you pay off your vehicle in full, you will no longer be subject to carrying the auto insurance minimums set forth by your lender.  However, you will still be required to carry a minimum amount of personal liability coverage as mandated by your state of residence, thought this is typically lower than lender-required minimums.

Also, you will typically not be required to carry comp and collision coverage on your vehicle any longer either. While these coverages are highly recommended for all auto owners, some drivers choose to drop this coverage if they feel the cost of coverage outweighs their vehicle’s market value.

Before dropping any coverage, talk to your car insurance agent. They can often give you the best advice on how much coverage you need for your specific vehicle and situation.