Perhaps you are tired of the excess paperwork in your home or office and wonder, “Should I save insurance statements?”
There is no right or wrong answer. For example, you may keep the car insurance statements for years and not need any of them. Then again, you may get rid of your insurance paperwork and then have to dig up pertinent information for the IRS during a tax audit or when filing a claim.
Therefore, you should consider the matter carefully before deciding how long to keep your insurance records. What works for you may not work for someone else.
How long should I keep my car insurance statements?
It would be best to keep your auto insurance statements for as long as your policy is active or there is a need to account for payments during tax time. You may need to refer to them when confirming whether your premiums are up to date or if the IRS asks you to show proof of payments.
In addition, in case of any dispute with the insurance company, you will have the documentation to prove that you have been paying your premiums faithfully.
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When should you keep insurance statements for tax purposes?
Sometimes, the IRS may review your accounts or financial information to determine whether you reported your taxes correctly and whether the amounts you paid match the reported values. That is known as a tax audit. And it can examine documents from as far back as three to six years. So, to be on the safe side, it would be best to keep your auto insurance statements for seven years.
However, not everyone should feel obligated to keep seven-year auto insurance records. This documentation only matters if you deduct your auto insurance premiums from your gross income to reduce your taxable income.
However, not everyone has the right to do such a thing. Usually, people who use their cars for business can deduct part or all of their auto insurance premiums from their income as business expenses for tax purposes. Also, suppose you are a qualified performing artist, reservist in the armed forces, or local or government official who gets paid on a fee basis. In that case, you can deduct car insurance expenses.
Therefore, if you don’t deduct your insurance premiums from your income, you don’t need to keep your auto insurance statements for seven years.
Do you need to use auto insurance statements when filing a claim?
If you file a car insurance claim, it could take two to four weeks to settle if your premiums are up-to-date and all your insurance documentation is in order.
If your claim is denied, you have recourse if you keep your statements. You will need to prove that your car insurance was active and may need to go through an arbitration, legal, or appraisal process before settling your claim. Auto insurance statements are worth keeping to help you out during such times, but they are not the most relevant documents in such a situation.
What proof of insurance should you have?
You can consider getting rid of your auto insurance statements if you still have the policy declarations page and your insurance card.
The former is a summary of your policy and includes the policy number, extent of coverage, coverage limits, and the policy’s term. Of course, if you have that information, you can refer to it to easily log into your insurance company account or call your insurance agent when an issue arises.
On the other hand, the insurance card is proof that your vehicle is covered. In some states, it is mandatory to carry the card.
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How long should you keep auto insurance policy documents?
Since you need at least the basic auto cover in all states but New Hampshire, it makes sense always to have some kind of insurance. And if you like what you have, you can renew it when your policy expires. Alternatively, you can buy another insurance policy from a different insurer or the company that currently covers you.
Generally, your auto insurance policy is valid for the duration of your contract with the insurer. Most of these policies tend to last six months to a year. So, that means you should keep your policy documents for as long as the policy is active. Then you can decide whether to get rid of the paperwork or not, depending on your situation.
Keep Your Auto Insurance Statements as Long as You Need to
How long you keep your auto insurance statement will largely depend on your situation. For example, if your policy is no longer active and you haven’t filed a claim, you don’t need to keep your statements around. However, if you deduct car insurance premiums from your income to reduce your taxes you should keep your statement for seven years.
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