Everything you need to know about insuring used cars

Getting the right insurance is critical for used car buyers.

Do you have questions about the auto insurance coverage you need prior to and after buying a pre-owned vehicle? Don’t worry! You’re not alone. Here are answers from insurance industry experts to some of the ones we’re asked every day.


Do I need insurance before I shop for a used car?

No, you don’t need insurance to go shopping for a car. However, you must have the minimum level of coverage required by your state to drive a car you’ve purchased off the lot.


The only exception is if you live in New Hampshire or Virginia. In those two states it’s not necessary to have auto insurance to own and drive a car. However state regulations make it inadvisable to NOT have it. In New Hampshire, you’re required to pay out of pocket for costs related to an accident. For Virginia, the same is true AND you also have to pay a fee for not having insurance.


Be aware: If you cause an auto accident, paying for expenses related to personal injuries, along with auto and property repairs, could add up to tens of thousands of dollars or more. This is much higher than the price of a policy to cover these things. In virtually all cases, even taking into account the best and safest drivers, having adequate auto insurance coverage makes sense when compared with not having insurance at all or being underinsured.


When should I shop for car insurance?

It’s smart to get insurance quotes at the same time you browse for pre-owned vehicles. You don’t want to consider models if you can’t afford the monthly insurance premiums for them. Once you’ve settled on a few possible used cars, you should research your insurance options. This will ensure that you can not only make the monthly payments for the vehicle, but for the insurance, as well.


How much used car insurance do I need?

Most states (except for New Hampshire and Virginia, as explained in the first section) have minimum auto insurance requirements. They are typically documented by a series of three numbers. The first one is per person minimum bodily injury coverage. The second is the level of per accident bodily injury coverage needed. And the third represents required property damage coverage.


An example of the three digit sequence is 15/40/25. If you live in a state that requires this level of coverage, it means you must carry $15,000 per person in bodily injury coverage, $40,000 per accident in bodily injury coverage and $25,000 in property damage limits.


In case you’re not aware of your state’s minimum insurance requirements, most reputable online insurance companies will supply the information when you get a quote. An insurance agent will be able to do the same.


Note: None of this required insurance covers you or your vehicle. It only covers the victims of an accident you cause.


What’s covered by the three types of insurance?

Here’s how each one protects the other parties in an accident you cause:

  • Per-person bodily injury: This covers medical expenses and lost wages of anyone you injure with your car, along with legal fees. It can include pedestrians, the occupants of other vehicles involved in an accident you’re responsible for, along with any individuals in your car you’re not related to. The amount covered is the maximum per person for anyone injured when you’re responsible for an accident.
  • Per accident bodily injury: This represents the maximum amount your insurer will pay out in total bodily injury related claims per accident. You will be responsible for expenses over the limit.
  • Property damage: This covers costs related to repairing or replacing property you damage or destroy with your vehicle. It can include things like other cars, fences, light posts, mailboxes or buildings.


Does it ever make sense to purchase more than my state’s minimum required level of coverage?

The answer is YES.


Although your state has minimum requirements, you should consult with your insurance agent or company representative to decide if the mandated coverage is enough and if not, what types and levels of insurance are right for you. You have to find the ideal balance between how much you can afford to spend on monthly premiums and what you’re willing and able to pay out of pocket if you have an accident.


Here’s an example of why your state’s minimum coverage may not be adequate.

  • You hit another car in an intersection when speeding to avoid waiting at a red light.
  • You’re clearly at fault.
  • Three passengers in the car you hit are injured.
  • They all need to be hospitalized, and the medical care for each of them costs $15,000.
  • You did significant damage to the vehicle and it will cost $10,000 to repair it.
  • You also ran into a building, which results in another $20,000 in repairs.
  • If you have a state minimum 15/40/25 policy, the $15,000 per person in hospital bills would be within your policy limit. However, because three people were injured, the total cost of $45,000 is $5,000 over your limit of $40,000 and you will have to pay it out of pocket. The same is true of the damage to the other car and building. The total of $30,000 in repair costs for these things is $5,000 above the limit of $25,000.


Based on this scenario, you must be prepared to cover $10,000 in accident-related expenses. This does not include coverage for you or your car. In order to cover injuries to yourself and your vehicle, you also need comprehensive and collision insurance.


Getting the right auto insurance coverage is more challenging than most people think. That’s why it’s important to consult with a reputable insurance agent, online provider or one recommended by your dealer to make sure you have the protection you need.


What’s the difference between comprehensive and collision coverage?

These are two very different types of insurance for your used vehicle.

  • Comprehensive insurance helps pay for damage to your car caused by things like flooding, fire, vandalism and hail. It also covers you if your car or personal possessions in it are stolen.
  • Collision insurance covers damage to your car from accidents when you hit, or are hit, by another vehicle or object.


Comprehensive and collision insurance are typically purchased together as an add on to your base policy. They’re not mandatory unless you plan to get an auto loan to finance your vehicle. Does it make sense to get this coverage? A good rule of thumb is that If your car is less than 10 years old, or worth more than $3,000, it’s probably a good idea to invest in these additional coverages.


How do I insure a used car?

Check rates with a few different providers. This will help you rest assured knowing you have the right coverage at a fair price.

  • Start by collecting information about the vehicle you want to purchase, including the car’s year, make, model, equipment package and the miles it’s been driven.
  • Share the information with your insurance agent or input it into an online quote system. You may also be able to get quotes from your used car dealer. In addition to information about your vehicle, you’ll also have to answer questions about where you live, where you plan to park your car and how much you plan to drive it. You may also have to provide personal information so the providers can check your driving record and credit history.
  • Next, you need to select your coverage and the amount beyond basic, state required liability protection.
  • Finally, you will be asked to decide on a deductible. This is the amount you have to pay out of pocket before the insurance coverage kicks in. A typical deductible is around $500 or $1,000. The higher the deductible you choose, the cheaper your used car insurance premium will be. Before you decide to increase your deductible to reduce your monthly premium, make sure you can afford to pay the higher deductible amount if you’re in an accident.
  • Once you do all this, you will receive your quote. It will be valid for a defined period of time. After you decide on a car, you can use the quote to purchase the insurance you need to drive the vehicle off the lot.


Can I use an existing policy to cover a replacement used car?

If you currently own a vehicle, contact your insurance provider to let them know you’re planning to purchase a replacement. Your state may allow you to apply an existing vehicle policy toward your newly purchased car for between seven and 30 days. Your insurance agent or rep will let you know for sure.


How can I save money on used car insurance?

There are a few things you can do, including:

  • Taking advantage of discounts. Most car insurers offer discounts for things like being a good student, purchasing a hybrid vehicle, driving less than the average person, driving safely and being a member of the military.
  • Prepaying your premium. You could cut costs if you pay for your insurance six months or one year in advance rather than monthly.
  • Signing up for e-billing and autopay. If you agree to receiving electronic statements and set up automatic payments, you may receive a small discount on your insurance.
  • Bundling your policies. If you already have homeowners or renters insurance, you may get a reduced rate if you purchase auto insurance with the same provider.
  • Selecting a higher deductible. As we’ve already covered, the deductible is the amount of money you have to pay out of pocket when you have an accident before your insurance kicks in. A higher deductible could lower premiums, but you have to make sure you can cover the deductible amount in the event of an accident.


What is full coverage and do I need it?

Full coverage typically includes liability, collision and comprehensive insurance. Having all three in a single policy covers yourself and others if you’re involved in an accident. If you will be taking out a loan to buy your used car, you will need full coverage. Otherwise, you should work with your insurance provider to find out for sure.


Tip: A general rule-of-thumb says you should get full coverage on a used car if the cost of upgrading to full coverage is 10 percent or less of your used car’s value. Use it as a baseline to guide your conversations with insurance experts.


Is gap insurance worth it on a used car?

Gap stands for guaranteed auto protection insurance. It helps make up the gap between the value of your vehicle and what you owe on it if it’s totaled in an accident. Gap insurance for used car models isn’t normally necessary because they don’t drop in value as quickly as new cars do. Your insurance or car loan provider will advise you.


Are used cars cheaper to insure than new ones?

It could be the case because used cars are typically worth less than new models. However, newer cars typically have more safety features that could prevent or limit accidents or damage because of them. Getting quotes on specific models is the only way to know for sure how much it will cost to cover them.


Ready to get started?

Contact us for more information.