Do You Need Full Coverage Insurance on a Used Car? (2024)

FAQs

Do You Need Full Coverage Insurance on a Used Car? ›

Do you need full coverage on a used financed car? As mentioned earlier, you don't legally need full coverage, but you'll have a harder time getting a loan for your vehicle if you don't opt for full insurance coverage.

Since older cars, typically 10 years and older, aren't worth as much as those newer vehicles on the road due to depreciation, dropping comprehensive and collision coverage is a good idea if your vehicle's value drops to a level you feel comfortable paying out of pocket if it were totaled.

Paying for comprehensive and collision — the coverages that many people mean when they say "full coverage" — may not be worth it if your car's value is minimal and your policy includes a high deductible.

If you have a new model car, you probably want to keep full coverage even if you bought it without a loan. Having appropriate insurance protects your investment in your vehicle and prevents a large out-of-pocket expense if an accident happens. Some older cars still have a fair amount of value.

Full coverage car insurance is more expensive than a liability only policy. Another downside is that your premiums may increase after filing claims after a covered event. You can reduce costs by figuring out how much coverage you actually need.

If your car is financed or leased, your lender will usually require you to carry comprehensive and collision coverage. But even if your car is paid in full, comprehensive and collision can be worth carrying as they can pay to repair or replace your ride if it's damaged or stolen.

Most car dealerships, banks and other lenders require you to purchase comprehensive insurance if you finance or lease your car. Comprehensive coverage is worth adding to your insurance policy if you're looking for peace of mind and want your car protected in all scenarios.

Comprehensive and collision insurance are both options that you should consider adding to your policy. That's because comprehensive coverage protects your vehicle from unexpected damage like a tree branch falling or hitting an animal, while collision insurance protects against collisions with another object or vehicle.

If your car's value has fallen below a few thousand dollars, it might be time to consider dropping collision and comprehensive coverage. That's especially true if you have a high deductible, such as $2,000. At this point, an insurance payout may not merit the annual premiums.

The best way to protect yourself financially the recommended car insurance coverage is $100,000 per person, $300,000 per accident in bodily injury liability and $100,000 per accident in property damage liability.

How can a person lower the cost of his car insurance? ›

Increase your deductible

Depending on your insurance provider, paying a higher deductible (the amount you pay out of pocket before your insurance coverage kicks in, in the event of an incident) is typically a quick and easy way you can decrease your auto insurance payments.

Thus, when the cost of the premium becomes greater than the value of the car, the collision insurance stops being beneficial for a consumer.

Full coverage auto insurance can be extremely beneficial to have, but it typically isn't required unless you have an auto loan or lease. You may still want to add it to your policy, however. Full coverage insurance may be a good idea if you: Drive a new or expensive car.

Takeaway: A full coverage policy is generally more expensive than a liability-only policy, but it provides more financial protection and often has higher liability limits.

It's financially smart to keep car insurance that includes comprehensive and collision coverages on vehicles that are younger than a decade. The cost of insuring a 5-year-old car equates to 27% of the car's value. After 10 years, the annual cost of car insurance represents 35% of a typical car's value.

Even classic cars — which can sometimes require specialized insurance — are typically still cheaper to insure than a new model. You may also be able to cut back on how much insurance you need if you drive an older car, which can lower your payment even more.

American Modern is our No. 1 pick for classic car insurance, as it is known for its comprehensive spare parts coverage. Safeco is a good choice for daily drivers, and Hagerty is known for covering restoration projects. Classic car insurance specializes in protecting collectible or antique vehicles.

It almost always costs less to repair a car than buy a new one. Although something as severe as a blown motor or a failed transmission will cost between $3,000 and $7,000 to replace at a dealership, such repairs still don't cost as much as buying a new car.