Does My Car Insurance Premium Reduce When My Car Is Paid Off?

While some people get a car loan to help finance their purchase, others buy a new vehicle outright. However, some ask if they will see a decrease in their insurance policy now that the car is paid off. No. Paying off your car loan won’t reduce your insurance premium, but it gives you more control over the amount, type of coverage, and deductible you select, which can help you save money.

Things To Do After Paying Your Car Loan

While your premiums might not drop immediately after your car is paid off, you must take care of a few things.

• Get the title to your vehicle: This will be sent to you after paying off your loan.
• Remove the lienholder: Contact your insurer to clear the lien on your vehicle once you have the title. This is important because your insurance company will send payments to the lienholder if there’s a lien on your car.
• Review your coverage: This is the best time to modify and switch your car insurance coverage.

You can also check your credit score. Most providers use your credit score to determine your insurance premiums, and paying off your car loan can improve your score. If your credit score has improved, contact your insurer to see if they’ll review your car insurance rates.