Is It Worth Getting Full Car Insurance on a Used Car?

If you are paying cash for a used car, you are not required to get full-coverage car insurance. Most states require vehicles to have a minimum liability policy in effect for registration. Depending on the value of your vehicle, you may want to purchase a full-coverage policy to protect yourself from loss.

Full-Coverage Details

Full-coverage insurance covers damages to your vehicle caused by an at-fault accident, theft, fire or damage from weather or animal collision. A state-required liability policy covers only injury to other people and property damage caused by your car if you were at fault. No coverage is provided for your vehicle through a liability policy otherwise. A full-coverage policy pays you for the market value of your car or pays it to your lender to pay the loan's balance.

Considerations

A full-coverage insurance policy is the most expensive you can purchase; minimum liability policies are the lowest priced. If you paid cash for your car and could not easily replace it, a full-coverage policy has its advantages. Also, newer cars are less expensive to fully insure than older, high-mileage vehicles. When your vehicle loses its value, the higher-priced insurance coverage will not benefit you financially. For example, if you paid $1,000 for your vehicle, you'll likely pay more than the car's value in a short period of time to maintain the full-coverage policy

Loan Requirements

If you have a loan on your vehicle, check with your loan company to find out its insurance requirements during the term of your loan. This information is usually stated in your contract, along with the consequences of not keeping a full-coverage policy in effect. In the event of a loss, your insurance company will pay the bank for the market value of the vehicle and any excess after the loan to you. Without the coverage, you would still have to pay the vehicle's loan even though you no longer have it.

Personal Liability

People carry insurance of all kinds because of the unknown. You can get into an accident at anytime on the road, and your insurance protects you from financial loss. Often, state minimum liability policies do not offer adequate coverage for damages that can occur in a serious accident. Check with your insurance agent to discuss coverage limits and purchase an effective policy that you can afford. If you do not have enough coverage in place, you become personally liable for any damages you caused and can face potential lawsuits or out-of-pocket expenses.