How much used car insurance do I need?

The amount of used car insurance you need will depend on your state’s insurance laws. State laws require all drivers to carry some level of minimum liability coverage, and you will need that much auto insurance to legally drive. Depending on the age of your used car, you may need more (or less) used car auto insurance. Read our guide to learn more and to get cheap used car insurance quotes from local companies.

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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

UPDATED: Jun 4, 2021

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Many budget-minded car buyers are making the decision to buy a used car rather than a brand new vehicle today. How much insurance does a used car driver need as compared to a new car driver? Cars can lose value from the first day of ownership, and value is lost with the passage of time, miles being driven on the car and basic wear and tear. It can make sound financial sense to purchase a used car and reduce your exposure to financial loss due to vehicle depreciation.

When you buy a used vehicle, you will need to consider buying car insurance for your vehicle. By typing your ZIP code in a FREE rate comparison tool above now to compare rates. However, before you purchase a car insurance policy for your vehicle, you should consider how much car insurance you really need.

Why Your Coverage Amounts Matter

If you contact a car insurance company today to purchase coverage for your vehicle, one of the first questions the insurance agent will ask is what type of coverage you want to buy. There are different types of car insurance coverage available, and each offers you different benefits.

Liability coverage, for example, will pay for any expenses you may have to cover the expenses for another driver you hit in an accident. Collision coverage, on the other hand, will cover your car repairs up to a certain dollar amount. The different types of coverages available can prevent you from having to pay for these expenses out-of-pocket. So taking time to identify your coverage needs can result in great savings to you if you do need to file a claim.

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If You Don’t Have Enough Car Insurance

Most drivers are required to purchase at least a small amount of car insurance. These requirements may be dictated by a state law to prove financial responsibility on the road and a car lender’s requirements. Many drivers who want to save money on this driving-related expense may consider purchasing only the minimum amount of insurance required by their state and their auto lender.

While this is one way to keep the cost of insurance low, this strategy can expose you to financial risk. This means that you may have to pay for medical bills, car repairs and more for yourself as well as for any drivers and passengers you hit with your own car.

Consider the fact that you are responsible for all damages you create on the road.

Car insurance can pay for these expense for you, but only up to the amount of your coverage limits. If your coverage limits are low, you may still have to pay a large amount of money out of your own pocket.

Your State’s Requirements

In most states, drivers are required to prove financial responsibility behind the wheel. In some states, drivers are required to purchase liability coverage to prove financial responsibility. In other states, drivers can purchase a bond or make a large cash deposit with the state.

These alternatives require a driver to have a large amount of cash available to put up as proof of financial responsibility, and many drivers are simply not able to do that. Because of this, most drivers ultimately are required to purchase a minimum amount of liability coverage. You should research your own state’s insurance requirements. This can be used as a minimum baseline for the amount of coverage you need to purchase.

Keep in mind that many states have harsh penalties for drivers who don’t carry adequate coverage, including monetary fines, the suspension of a vehicle registration, the suspension of a driver’s license and more.

Your Car Lender’s Requirements

Some people purchase a used car with cash, but many others will purchase a used vehicle with a car loan. Just as is the case with a loan on a new vehicle, many used car loans require a car owner to purchase either collision or comprehensive car insurance.

This coverage, if required, typically must remain in place until the loan balance is paid in full. This is coverage that pays for your own vehicle to be repaired after an accident. While collision coverage only pays for damages related to a collision of some type, comprehensive coverage pays for other damages such as those related to weather, theft and more. If you car is financed and the car is totaled, the insurance benefits will be used to pay off your car loan first. Any additional proceeds can be used by you to purchase a new vehicle.

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The Need for Collision or Comprehensive Insurance

Care lenders may require collision or comprehensive insurance. However, if you purchase your used car with cash, you typically will not be required to purchase this coverage. It may still be a benefit to you, as you may want to purchase coverage that will repair your own vehicle if you get into an accident or experience some other type of damage to your vehicle.

The higher your vehicle’s value is, the more important it may be to have collision or comprehensive insurance in place. However, if you are buying a low value used car, you may consider only purchasing liability coverage. An example of when you may not want to purchase this coverage is if your vehicle has a value of $3,000. With a $500 deductible in place, the maximum benefit you would enjoy from collision coverage is $2,500 if your car is totaled.

Further, your car value may continue to depreciate, which further reduces the value of collision or comprehensive coverage. On the other hand, if your vehicle is valued at $15,000, collision or comprehensive coverage can be more beneficial.

As you can see, a number of factors will determine how much car insurance you need to buy for your used car. These factors include your state and lender requirements, the car’s value, your personal level of savings and more. By reviewing these factors in more detail, you can more easily determine the amount of coverage that is right for you. You can use a FREE comparison site now by entering your ZIP code above to start shopping for car insurance on your used car.

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