Full coverage insurance isn’t legally required on used cars, but it is often contractually required when a car is financed. That’s because the lender owns the vehicle until the loan is repaid, and they want to protect its actual cash value (ACV) in case it’s damaged or totaled. Full coverage protects the lender's investment, allowing reimbursement if something happens to the car.
Do You Need Full Coverage Insurance on a Used Financed Car?
Updated: May 26, 2025
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Key Takeaways
Full coverage may be worth it if your used car’s actual cash value is significantly higher than your annual premium.
Once your car loan is paid off, full coverage becomes optional. However, dropping it too early can leave you exposed to costly out-of-pocket repairs.
The average cost of full coverage for a used car is $1,264 per year, but rates vary widely by insurer and vehicle type.
Is Full Coverage Required for a Financed Used Car?
When Is Full Coverage Insurance Required?
Full coverage is required if your used car is leased or financed through a loan. Lenders usually require both comprehensive and collision coverage until the loan is fully paid off, with some even requiring gap insurance. If your vehicle is stolen or totaled in an accident, these coverages help repay the remaining balance.
Once you own the car outright, full coverage becomes optional. That’s when it’s smart to compare your car’s ACV to your annual premium and decide if full coverage is still worth the cost.
MINIMUM CAR INSURANCE IS LEGALLY REQUIRED
You need a car insurance policy to legally drive any car, whether new or used. The amount of coverage you need depends on where you live. Each state has its own minimum car insurance requirements. No state requires full coverage insurance.
What Does a Full Coverage Insurance Policy Include?
A full coverage policy combines multiple types of protection that cover both damage you cause to others and damage to your own vehicle from accidents, theft, weather and other incidents. The table below breaks down what's included and what each coverage does.
Coverage Type | Description |
|---|---|
Helps pay for the treatment of injuries the other party incurred in an accident where the policyholder is at fault. It also covers property damage to the other party. | |
Helps pay for the cost to repair damages to the policyholder’s vehicle (including windshield replacement) due to non-collision incidents, such as fire, weather-related events, vandalism and theft. | |
Helps pay for repair costs if the policyholder’s vehicle gets damaged in a collision with another vehicle or object. | |
Provides additional protection in the event of a car accident caused by a driver who is either uninsured or underinsured, and also covers hit-and-runs. | |
Also called no-fault car insurance, Personal Injury Protection (PIP) helps pay for medical expenses incurred by the driver and their passengers regardless of who is at fault in an accident. |
When Is Full Coverage Worth It for a Used Car?
Full coverage isn’t always necessary, but it can offer valuable protection, especially if your used vehicle is still worth a significant amount. The key is weighing the annual cost of full coverage against your car’s actual cash value (ACV) to determine if it’s financially sensible.
How to Decide If Full Coverage Is Worth It
If your used car’s ACV is much higher than your annual premium, full coverage may be worth it. This is often the case for newer used vehicles, luxury or electric cars, or any car that would be expensive to repair or replace out of pocket. Rising used car prices have also made full coverage more appealing in recent years, even for mid-range vehicles. Full coverage is a smart choice if you rely on your vehicle daily and can't afford to replace it yourself in case of a serious accident.
When to Drop Full Coverage on a Used Car
As your car’s value declines, there comes a point when full coverage no longer makes financial sense. If your vehicle’s ACV is close to or less than the cost of your annual premium, you’re likely paying more than what the insurance would reimburse in a total loss.
This threshold varies by car, so it’s best to estimate your ACV and compare it against your premium. Once the numbers no longer add up, it may be time to drop comprehensive and collision coverage, especially if you're confident you can cover smaller out-of-pocket expenses.
How Much Is Full Coverage Car Insurance?
Full coverage car insurance costs an average of $1,264 per year, though your actual rate can vary based on your vehicle, location and driver profile. This type of policy includes comprehensive and collision coverage, making it more expensive than a state minimum policy but with broader protection.
Among major insurers, Travelers offers one of the lowest average rates at $1,116 annually. The figure below shows how costs can differ depending on the model of your used car.
Cost of Full Coverage Car Insurance
MONEYGEEK EXPERT TIP
About 80% of U.S. drivers carry comprehensive and collision coverage. The average premium for comprehensive is typically under $200 annually, and the average premium for collision runs about $400 to $500 a year; taking higher deductibles can lower these costs. — Mark Friedlander, Director, Corporate Communications, Insurance Information Institute
Cost of Full Coverage Insurance on Used Cars by Company
Another factor affecting the average cost of car insurance is the insurance provider. Different companies charge different rates. The table below breaks down how much, on average, a driver may expect to pay for a full coverage policy on a used vehicle with one of the leading insurance companies.
| USAA | $826 |
| Travelers | $1,116 |
| GEICO | $1,216 |
| Nationwide | $1,240 |
| State Farm | $1,293 |
| Progressive | $1,333 |
| Allstate | $1,526 |
| Farmers | $1,564 |
COMPARE QUOTES TO FIND THE BEST INSURANCE
Choosing full coverage can result in higher insurance premiums. If you find the cost too expensive, you can start with the cheapest full coverage insurance available for your car. Comparing quotes from different companies can also help you find the best auto insurance that balances affordability and quality service.
Do You Need Full Coverage on a Financed Used Car: Bottom Line
On this page, we discussed when full coverage insurance is necessary for a financed used car and how to determine if it’s worth the cost. While it’s not legally required, lenders often mandate it to protect their investment. Even if it’s optional, full coverage can be a smart choice for high-value vehicles or those with costly repairs.
Evaluate your car’s value, loan agreement and financial needs to decide if full coverage aligns with your situation.
Do You Have to Get Full Coverage Insurance on a Used Financed Car: FAQ
Whether you need full coverage on an old car depends on your circumstances. While it is a personal choice, knowing the answers to the most commonly asked questions can help you make a well-informed decision.
Do I need full coverage insurance on a used car?
Whether you need full coverage on your used car depends on your situation. You may want a full coverage policy for maximum protection due to the rising costs of used cars. Lessors and lenders may also require full coverage for leased and loaned vehicles.
When should you drop your full coverage car insurance?
If the actual cash value of your vehicle is less than the cost of your full coverage policy, you may be spending more than what your car is worth. In this instance, it may be best to drop your full coverage car insurance.
Do used cars need comprehensive coverage?
Comprehensive coverage isn’t always necessary for used cars. However, if you own an expensive car, such as a sports, classic or luxury vehicle, it may be wise to have comprehensive coverage. The rising costs of all cars mean that it may be wise to consider comprehensive coverage for any used car.
Full Coverage Rates on Used Financed Cars: Our Review Methodology
Why Trust MoneyGeek?
MoneyGeek conducted a study and gathered data from Quadrant Information Services and state insurance departments using various profiles and geographic locations to showcase how critical it is to compare car insurance rates when shopping for a policy — as rates for the same individual profile can differ greatly across insurance companies.
Study Overview
Comparing car insurance is critical to finding the best rates and coverage. Rates differ greatly depending on a variety of factors, including age, geographic location, vehicle type, driving records, credit history and the insurance company. To provide the most helpful information, MoneyGeek gathered quotes based on these factors to create data-backed averages to help you find and compare car insurance quotes to discover the best affordable options for you.
Data Acquisition, Depth and Analysis
MoneyGeek gathered quotes from Quadrant Information Services as well as state insurance departments and analyzed 83,056 quotes from 46 companies across 473 ZIP codes.
Driver Profiles
MoneyGeek used a sample driver profile to collect consistent average insurance rates. The average driver profile is based on the following persona:
- 40-year-old male
- Clean driving record
- 100/300/100 liability limits
- Comprehensive and collision coverage with a $1,000 deductible
- 2010 Toyota Camry LE
- 12k miles driven annually
This profile was modified by age, location and vehicle, as well as driving and credit history, to collect additional data that most accurately provided averages for different driver needs and profiles.
Coverage Levels and Deductibles Explained
Average rates on this page are for a full coverage policy with 100/300/100 liability limits and comprehensive and collision coverage with a $1,000 deductible unless otherwise noted.
A 100/300/100 policy means:
- $100,000 bodily injury liability per person
- $300,000 bodily injury liability per accident
- $100,000 property damage liability per accident
A $1,000 comprehensive and collision deductible means that you would need to pay $1,000 before your insurance provider covers a claim for damages to your car. Generally, a higher deductible means a lower policy premium.
Learn more about MoneyGeek's methodology.
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.