Do you need full coverage on a financed car?

You will always need full coverage on a financed car. If you don’t get full coverage on your financed car, your lender could cancel your loan and repossess your vehicle.

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Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently a professional writer.

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Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business. Brad is licensed in all P&C lines.

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Reviewed by Brad Larsen
Licensed Auto Insurance Agent Brad Larsen

UPDATED: Mar 7, 2022

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Things to Know

  • Drivers who finance their cars are required to have full coverage
  • On average, full coverage car insurance is $94 a month
  • GEICO is one of the cheapest companies for full coverage insurance

Did you know that finance companies and lenders require you to have full coverage on your car? But how come?

Full coverage produces expensive car insurance quotes, and some drivers decline full coverage insurance to save money. But don’t worry, we’ll show you which insurance companies provide affordable rates.

Our guide shows why lenders make full coverage mandatory for your financed car and where you can get cheap full coverage car insurance rates.

If you want to shop for full coverage for your financed car right now, enter your ZIP code above to compare multiple insurance companies in your area.

Do you need full coverage on a financed car?

Yes, you do. Liability-only car insurance covers damages and injuries to other drivers. But full coverage adds a layer of protection that pays for damage to your vehicle even if you’re at fault in an accident.

Some insurance companies may even suggest you raise your coverage limits just in case your car is involved in a total loss accident.

Why do I need full coverage on a financed car?

Although you own the car, the lender is the title holder and insists that you get full coverage to protect the investment. Full coverage also ensures that you can avoid costly out-of-pocket expenses for repairs.

You should consider GAP insurance, too. If you get into a total loss accident, GAP insurance can pay for the remaining balance of the loan you owe.

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What is full coverage and how do you get it for a financed car?

Full coverage insurance is a combination of comprehensive, collision, and liability coverages. Each coverage provides something different and together they fully protect you and your vehicle.

In addition to multiple options, full coverage auto insurance may be the most expensive option you see.

You can get full coverage right after you receive your car insurance quote. There should be multiple selections, and full coverage insurance will be among them.

Once you decide on a quote, you can send your request to the car insurance company and wait for them to finalize your insurance policy.

What if you don’t get full coverage on a financed car?

Some lenders will cancel your loan and repossess your financed vehicle. Other lenders may buy insurance for you, but the lender adds the cost of insurance to your monthly payments.

How much is full coverage insurance for financed cars?

The cost of full coverage car insurance is based on several factors, but where you live is one of the most significant determining factors.

Full coverage is $94 per month on average, but states like Michigan and Louisiana have higher than average rates.

Let’s look at the cost of full coverage based on projections from the latest National Association Insurance Commissioners (NAIC) report.

NAIC Average Monthly Rates by Coverage Type and State
StatesAverage Monthly Liability RatesAverage Monthly Collision RatesAverage Monthly Comprehensive RatesAverage Monthly Full Coverage Rates
Alabama$39$30$14$83
Alaska$47$31$12$91
Arizona$50$26$17$92
Arkansas$37$30$18$85
California$47$38$8$93
Colorado$52$26$20$98
Connecticut$62$33$11$106
Delaware$71$28$11$110
District of Columbia$61$42$19$122
Florida$79$28$11$118
Georgia$60$32$14$106
Hawaii$39$28$9$76
Idaho$33$21$11$65
Illinois$41$28$11$80
Indiana$35$23$11$69
Iowa$28$20$17$65
Kansas$33$23$22$78
Kentucky$48$25$13$86
Louisiana$77$38$20$135
Maine$31$24$9$63
Maryland$58$33$13$104
Massachusetts$53$35$12$100
Michigan$74$38$13$126
Minnesota$40$21$17$78
Mississippi$42$30$19$91
Missouri$40$25$17$82
Montana$35$23$22$80
Nebraska$34$22$21$76
Nevada$68$28$10$106
New Hampshire$35$27$10$72
New Jersey$77$34$11$121
New Mexico$46$25$16$87
New York$73$36$15$124
North Carolina$31$27$11$69
North Dakota$25$22$21$68
Ohio$36$24$11$71
Oklahoma$41$28$21$90
Oregon$55$22$8$85
Pennsylvania$44$30$13$88
Rhode Island$71$38$11$121
South Carolina$53$25$16$94
South Dakota$27$19$25$72
Tennessee$38$28$13$79
Texas$51$35$20$106
Utah$47$24$10$81
Vermont$31$27$12$69
Virginia$39$25$12$76
Washington$55$25$9$89
West Virginia$43$29$18$89
Wisconsin$34$20$13$67
Wyoming$29$24$24$78
Countrywide$50$30$13$94
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We included liability, collision, and comprehensive insurance to show you different portions of full coverage. These coverages don’t include other options like rental car reimbursement or GAP insurance.

Therefore, the price of car insurance will likely change when you shop at multiple different companies.

How much is full coverage at the best car insurance companies?

The company that provides your insurance policy is also a major factor in determining your costs. Some companies issue more affordable rates than others.

Check out the table below to see how the best car insurance companies in America compare to one another.

Car Insurance Rates by Company
CompaniesMonthly Car Insurance Rates
Allstate$318
American Family$224
Farmers$288
GEICO$179
Liberty Mutual$398
Nationwide$229
Progressive$283
State Farm$235
Travelers$287
USAA$161
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USAA and GEICO are the most affordable companies, but USAA car insurance is only available to veterans and their immediate families. So, most people who shop for car insurance will need to look at the other nine companies.

You may want to consider American Family, Nationwide, and State Farm if you want to save money on car insurance.

Can I get cheaper insurance rates on a financed car?

Yes, you can. Drivers can qualify for discounts, which can lower car insurance rates by at least 15%. For example, a person with a clean driving record and good credit could save up to 30% on insurance.

Does insurance go down after you pay off your car loan?

No, it doesn’t, but you can shift from full coverage to liability-only car insurance. We recommend that you keep full coverage, especially if your vehicle was manufactured in the last five years.

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What is the bottom line?

You are always required to carry full coverage on a financed car. Full coverage insurance could protect you from expensive out-of-pocket costs and provide coverage even if you were at fault in an accident.

Lenders require you to have full coverage to protect their investment, but specific areas of full coverage may not pay for the loan if you get into a total loss accident. So, we recommend adding GAP insurance.

Before you buy full coverage for your financed car, use our free online tool below to compare multiple quotes from the best insurance companies near you.

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