Why Your Tax Refund Is the Perfect Time to Fix Your Insurance Gaps 

Using your tax refund for auto insurance is one of the best ways to fix insurance gaps, save money, and set yourself up for success for the rest of the year. If you’ve been living with less-than-ideal coverage, the extra cash from your tax refund can help you upgrade your auto coverage on a budget. Explore these refund budgeting tips from Freeway to learn how your tax refund can solve your coverage problems. 

Why Tax Refunds Create the Perfect Moment for Insurance Updates 

If looking for affordable coverage upgrades is on your to-do list, tax season is the perfect time to cross it off. There are multiple reasons that you should pay for your policy with your refund this year.: 

Affordable Opportunity to Improve Protection 

Using your tax refund for auto insurance allows you to upgrade your coverage without digging into your usual budget. It’s not often that you get a sudden influx of extra cash, so it’s important to use that money wisely. Applying some of the refund toward your coverage is a strong investment in your financial security, especially as auto costs increase. 

Some drivers explore coverage upgrades through Auto Club, a Freeway roadside assistance program designed to help drivers stay protected and avoid unexpected out-of-pocket costs. 

Eliminating Lapsed Coverage Risks 

When you get money back from your taxes, you have the opportunity to get some big payments out of the way. You may even be able to pay for your entire car premium at once, which eliminates the risk of your policy lapsing due to non-payment. 

Common Insurance Gaps Drivers Overlook 

Coverage gaps are more common than you think. Just because you have an active policy doesn’t mean you’re getting the coverage you really need. Unfortunately, most drivers simply aren’t aware of insurance gap risks and how they can cause trouble down the line. If you’re thinking about using your tax refund for auto insurance, here are some of the gaps you need to address: 

Liability Limits That Are Too Low 

Every state has minimum requirements for liability policy limits. However, as cars, repairs, and medical bills get more expensive, these liability limits may not be enough. If you get into a wreck with a luxury vehicle, or if someone gets seriously hurt, your $10,000 property damage liability limit may not be enough. Upgrading your policy limits from liability to full coverage can give you essential protection when worst-case scenarios occur. 

Missing Comprehensive or Collision 

Many people only look for the most affordable options when signing up for coverage, which usually means they only have liability protection. If you have a liability-only policy, you’ll be out of luck if you need to repair your own vehicle after an accident. 

Missing comprehensive coverage also means that you can’t make a claim due to weather, theft, vandalism, or other non-collision situations. It’s even more important to get a full coverage policy if you financed your car, as many insurers require it. 

No Uninsured Motorist Coverage 

Your liability plan is there to limit your financial responsibility if you get into an accident. But what if the other party doesn’t have insurance? While most states have mandatory auto coverage laws, not everyone follows the rules. Without uninsured motorist coverage, you may have to pay out of pocket for repairs even if the other party was at fault. 

How To Prioritize Your Insurance with Your Refund 

If you have any of the above insurance gap risks, it’s time to upgrade your coverage. But what’s the best way to pay for insurance with your refund to maximize car insurance savings? By following a few tax refund budgeting tips, you can maximize the impact of your refund to secure the affordable coverage upgrades you need. 

Upgrading Essential Coverage First 

Getting the right level of protection should be your first priority. Look at your coverages, policy limits, and coverage types to identify any gaps or blind spots. Start by increasing your limits, getting comprehensive and collision protection, and adding on uninsured motorist protection. Upgrading your most essential protections will ensure that you can actually use your policy if an accident happens. 

Paying Off Past-Due Balances 

When times are tough, it’s easy to get a little behind on bills. However, not paying your auto bill can lead to your coverage being cancelled, so it’s important to keep an eye on past-due balances. 

Consider using some of your refund to pay off your debts to keep your protection active and keep your account out of collections. Without the balance hanging over your head, you can manage your insurance budget more effectively. 

Prepaying Premiums to Save Money 

Paying your premium up front is one of the best low-income insurance tips. You can often get a significant discount on your policy if you pay for the entire thing at once instead of breaking it into monthly installments. 

Not everyone can afford to pay that lump sum out of their regular paycheck, which is why tax season comes in handy. You can use your tax refund for your auto insurance payment and cover your whole premium at a discounted rate. Plus, you can avoid tacked-on fees like installment fees or monthly administrative charges. If your current insurer doesn’t offer a discount, it could be a good time to switch to Freeway. 

Use Your Refund Wisely and Upgrade Your Auto Coverage Today 

Tax season is one of the best times to take care of major expenses, such as your six-month auto policy premium. Having a bit of extra cash from your taxes is the perfect opportunity to fix insurance gaps without putting extra strain on your monthly budget. 

If you want to maximize your car insurance savings this tax season, the Freeway team is here to help you get the best bang for your buck. At Freeway Insurance, your tax refund can go even farther thanks to special discounts, affordable rates, and reliable coverage options. Get a free quote online, call (800) 777-5620, or visit us in person to start saving. 

FAQs 

Explore even more low-income insurance tips with this helpful Q&A about auto policies, tax season, and premium savings: 

Can I Use My Tax Refund to Pay My Insurance in Advance? 

Yes, you’re able to pay for your policy in one lump sum with your tax refund. Many people split their premium up into monthly payments, but paying in one lump sum can reduce your monthly expenses. Additionally, some insurers even offer a discount if you pay up front, making tax season the perfect time to get ahead on your premium payments. 

Is Car Insurance Tax Deductible? 

Car insurance for your personal vehicle isn’t usually tax-deductible. However, in some situations, you can deduct some or all of your auto coverage as a business expense. If you’re a gig worker, contractor, or business owner and use your vehicle for business purposes, you could be eligible for a tax deduction. 

Do Payment Plans Change After a Lump-Sum Payment? 

When it comes to auto insurance, your monthly payments will be reduced after a lump-sum payment. If you pay the entire premium up front, you won’t have a monthly payment. Talk to your insurer to iron out the details so you can budget appropriately. 

Why Are Insurance Gaps So Dangerous? 

Having a gap in your auto insurance can leave you without protection in the event of an accident, potentially leaving you on the hook for tens of thousands of dollars. If you cause an accident while uninsured, or get hit by an uninsured driver, you’ll be responsible for covering all of the damages with no support from your insurer. 

Does Prepaying Save Me Money in the Long Run? 

Prepaying your auto premium can often save you money long term through up-front payment discounts and the elimination of ongoing administrative fees. Instead of paying installment fees or inflated monthly rates, you’ll only have to pay a discounted lump sum.