I’m frequently asked by clients if they can do something to save premium on a vehicle that they will be parking for a while. For example, perhaps they have a car that they only drive in the summer and it sits in the garage all winter. Or maybe the vehicle isn’t running or they want to drive a more economical vehicle to save on gas.
Minnesota law requires that your vehicle be insured when driven on public roads, but there is no statute requiring you to carry coverage on a vehicle when it’s not being driven.
For this reason, people sometimes simply remove the vehicle from their Auto policy while it is parked. If you were carrying “Liability only” on your vehicle, this generally makes sense. However, if you were fully insuring your vehicle to protect it against damage and theft, you might want to think twice about removing all coverage from the vehicle.
Just because your vehicle is parked doesn’t mean that nothing can happen that would cause damage. If you store your vehicle in a garage, the garage could burn down. If your vehicle is parked outside, a tree could fall on it or it might be damaged by hail. Your vehicle could also be stolen or vandalized. If you remove all coverage from your vehicle and one of these things happen, your loss is not going to be covered, leaving the entire value of the vehicle at risk. (Contrary to common assumption, Homeowners insurance never covers automobiles, even if they are parked in an insured garage.)
So, if you decide to park a vehicle that you have been fully insuring, a better option is to reduce your coverage to Comprehensive only. This is sometimes called “storage insurance”. Comprehensive covers non-collision damage that could occur while your vehicle is parked, including fire, hail, theft, vandalism, falling objects, water damage, etc. While the cost for this coverage varies, in many cases going with storage coverage will save you around two-thirds of the premium.
Whether you chose to drop your parked vehicle entirely or to reduce coverage to Comprehensive only, it is important to make sure that no one is going to drive the vehicle, since, either way, the vehicle isn’t legal to be on the road and doesn’t carry basic coverages you need for third party liability, occupant injury, damage to the car caused by collision, etc.
It could be really bad if you or another family member forgot (or was unaware) that insurance had been suspended and drove the vehicle and either got stopped by the police (bad) or got in an accident (far worse). For this reason, we recommend rendering the stored vehicle inoperable (some people remove the battery) or at least placing a large sign over the steering wheel warning that it can’t be driven.
Even if you are certain that no one is going to drive the vehicle while it is parked, reducing coverage on your parked vehicle isn’t entirely without risk. As I mentioned earlier, with storage insurance, your vehicle is only covered for “non-collision” damage. It’s not covered if you accidentally hit it with your other vehicle, which happens more than you might think. Or if somehow the vehicle started to roll and struck another object, that wouldn’t be covered either. Thirdly, let’s say you had friends or relatives over, and small children were climbing around on the parked vehicle and one fell off and was injured; this could easily result in a claim or suit against you, and it’s unlikely that either your Homeowners or Auto insurance would protect or defend you or pay anything for the injury.
It’s worth keeping in mind that suspending coverage on your parked vehicle might be inconvenient if you needed or wanted to drive it again without advance notice. Because you’d first need to get ahold of your insurance agent or carrier and confirm that regular coverage has been reinstated. (Leaving a voice mail for your agent is not good enough.)
Sometimes people park a vehicle that they intend to sell and think that storage insurance will be sufficient. The problem is that it is not wise to allow a potential buyer to test drive your vehicle if it’s not properly insured. What would happen if the prospective buyer got in an accident during the test drive? While the driver would likely be covered if they already have their own Auto policy, you wouldn’t have any coverage as the owner of the vehicle. In addition to possibly losing the value of the vehicle, you might sued or held responsible for third party injuries or damage as well. For these reasons, we recommend leaving coverage as-is on a vehicle that you are trying to sell.
There are some cases where it might not be possible to either reduce or remove coverage from your parked vehicle. For one, a few carriers might not offer the option for storage insurance. Secondly, if you have a loan on your vehicle, then you have probably agreed to carry both Collision as well as Comprehensive coverage. (Some insurance companies might let you keep both Comprehensive and Collision to satisfy your loan and drop everything else, but many other carriers don’t have this option.) When clients call regarding parking a financed vehicle, we usually recommend that they talk to their bank to see what they will allow.
Another problem might be if this is the only vehicle on your policy. For one, many carriers aren’t going to let you suspend all or most coverage on the only vehicle you insure. And if you were able to drop basic coverage off your only insured vehicle, you would lose your coverage for situations like borrowing a friend’s car, renting a car and protection if you were hurt in a car accident as a passenger or pedestrian.
Local ordinance might also prevent you from reducing or removing coverage from your parked vehicle. Some towns and cities require that all vehicles parked on city streets or even on private property within the city limits carry insurance. (Such rules exist to prevent an unsightly build-up of old junkers or just unnecessary extra vehicles in the neighborhood.)
One other thing to note is that if you don’t keep regular coverage on your parked vehicle, you can’t renew your tabs, since you will be asked to document that your vehicle currently carries required insurance coverage.
I hope you find this post informational and helpful. If you have any questions, I’d love to hear from you!
Ken Cobb is owner of Pine Country Insurance and has been active in the insurance industry for over 15 years. Meet Ken.
Coverage descriptions found in this blog are summaries provided for general educational purposes and cannot fully detail the terms, conditions, limitations or exclusions of a specific insurance policy. Please read your policy carefully.