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?
If you're financing a used car, your lender will likely require full coverage insurance to protect the vehicle until the loan is fully paid off.
Find out if you are overpaying for car insurance below.

Updated: July 8, 2025
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Key Takeaways
Full coverage car insurance is worth it if your used car's actual cash value (ACV) is significantly higher than your annual premium.
After paying off your car loan, 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 $1,586 per year, but rates vary widely by insurer and state.
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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 is Full Coverage Car Insurance?
A full coverage policy combines liability coverage with other types of protection to cover both the 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.
You're Still Making Loan or Lease Payments
Lenders usually require full coverage until the loan is paid off. Even if it's not required, it protects you from being upside down on your loan if the car is totaled.
Your Car Still Has High Value
Full coverage is worth considering if your car’s ACV is significantly higher than what you’re paying in annual premiums. A good rule of thumb: if full coverage costs less than 10% of your car’s value per year, it’s usually a smart investment.
You Can’t Afford to Replace the Car
If paying out of pocket to repair or replace your vehicle would wreck your budget, full coverage is a smart financial cushion. It limits your exposure to sudden large expenses.
You Live in an Area Prone to Natural Disasters or Theft
Drivers in regions with high rates of flooding, hail, hurricanes or car theft may benefit from full coverage, which includes comprehensive protection. Without it, you’d pay out of pocket for non-collision damages.
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
When to Drop Full Coverage on a Used Car
Full coverage isn’t always worth keeping as your car ages and loses value. Knowing when to drop comprehensive and collision coverage comes down to risk tolerance, vehicle worth and how much you’re paying in premiums.
Your Premium Is Close to Your Car’s Value
If your yearly full coverage premium is nearly equal to your vehicle’s actual cash value (ACV), you're likely overpaying for a minimal potential payout. In a total loss, the insurer would only reimburse what the car is worth, not what you paid in premiums.
Your Car Has Significantly Depreciated
Older vehicles with high mileage or cosmetic wear typically lose value quickly. Once your car’s worth dips below the cost-benefit line, full coverage may no longer be a wise expense.
You Can Afford Minor Repairs or Replacement
If you’re financially able to handle repairs or even replace the car outright, you may not need collision or comprehensive coverage. Dropping it frees up cash while still keeping liability protection.
What to Do With Coverage After Paying Off Your Car
Once your car loan is paid off, you're no longer required to carry full coverage, but that doesn’t mean you should drop it immediately. Your next move should depend on your car’s current value, your financial situation and your risk tolerance. A few simple steps can help you make the right coverage decision.
- 1
Reassess Your Car’s Value
Check the actual cash value (ACV) of your vehicle using tools like Kelley Blue Book or Edmunds. This gives you a baseline for comparing against your insurance premium.
- 2
Compare the ACV to Your Annual Premium
If your full coverage premium is close to or exceeds 10% of your car’s ACV, it may no longer be cost-effective. That means you could be paying more than what the policy might reimburse after a total loss.
- 3
Evaluate Your Financial Cushion
Ask yourself if you could afford to repair or replace your car out of pocket. If not, keeping full coverage could save you from a major unexpected expense.
- 4
Decide Which Coverages to Keep
Even if you drop comprehensive and collision, you'll still need to maintain liability insurance to meet state requirements. You might also consider keeping uninsured motorist coverage or roadside assistance for added peace of mind.
- 5
Shop Around for New Quotes
Paying off your car is a good time to re-evaluate your entire policy. Comparing quotes from multiple insurers can help you save money while keeping only the coverage you truly need.
How Much Is Full Coverage Car Insurance?
Full coverage car insurance costs an average of $1,586 per year, though your actual rate can vary based on your vehicle, provider, 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.
The table below shows how costs can differ depending on the model of your used car.
AIG | $848 |
Travelers | $1,029 |
GEICO | $1,107 |
Nationwide | $1,387 |
Progressive | $1,592 |
Allstate | $1,644 |
Farmers | $1,850 |
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
If you’re financing a used car, full coverage insurance is typically required by your lender until the loan is fully repaid. This protects the lender’s investment in case the car is damaged or totaled.
Once you own the car outright, full coverage becomes optional, but dropping it too soon could leave you vulnerable to major repair or replacement costs. To decide if it’s worth keeping, compare your car’s actual cash value (ACV) to your annual premium and assess your financial ability to cover potential losses.
Compare Auto Insurance Rates
Ensure you're getting the best rate for your auto insurance. Compare quotes from the top insurance companies.
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.