You may be one of the many people making this mistake with your insurance. It’s an easy mistake to make, because you probably feel like you’re saving money. However, the money that you think you’re saving? You’re going to end up paying big time in the long run.
This may seem like a good idea at the time. Perhaps you’re going car-free for a short period of time and want to cancel your insurance to save money. While this may be an enticing idea, this will end up actually costing you more money.
Angela Gaspar, an assistant office manager at A to Z Insurance has seen this happen all too often.
“We unfortunately have a lot of customers that do this,” Gaspar said. “This mistake is costing people their money.”
If you cancel your policy, your insurance score will go up. This means that when you go back to get a new insurance (whether that be in a matter of months or years), your insurance cost will also go up.
A gap in between your car insurance (no matter how long or short) can cause you to pay higher premiums in the future as this may flag you as a higher risk for insurance companies.
No matter where you go, your claims history will follow you. So if you are cancelling your policy due to a price increase, that increase will likely be the same elsewhere. Therefore, you will end up spending more money and getting more of a headache if you try to change or cancel policies for this reason.
However, if you kept your original insurance policy, you will build on your insurance company and you will save money by doing this. You will save money in the long-term if you do this.
While saving money in the short-run by cancelling your policy may seem like the right move at the time, it will end up being detrimental in the long-run.
“Cancelling your policy hurts more in the long run,” Gaspar said. “That actually hurts everyone.”
Not only does this practice result in you losing money, but it will also hurt the insurance company.
When a company issues a premium policy, the insurance company has to pay off that money. Therefore, if an individual cancels that policy, that’s losing the insurance company the money they were expecting to have for that period of time. Although one person doing this may not affect much, many people making this mistake can be harmful to the insurance companies and their customers.
In the end, you may be tempted to save money by cancelling your car insurance. If you are planning on making this decision, take a look at your options and be aware of what this could do to you in the future.
“If you don’t educate yourself, you’re throwing money away,” Gaspar said.
Don’t make the mistake of saving money now, only to pay more in the future. For more information about how you can save money on your insurance visit more of our blogs on this website!