Will car insurance cover a used car?

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Melanie Musson
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UPDATED: Mar 13, 2020

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There are many reasons why a person may choose to buy a used car. Vehicles depreciate quickly, making car payments a bad investment: You will pay much more in car payments over time than the car is actually worth. It’s much easier to buy a used vehicle in cash than it is to pay cash for a brand new car. Not only are used cars more affordable to purchase, they may also be more inexpensive to insure.

Car insurance is necessary for any vehicle that you intend to drive. In order to register a vehicle, you will need to buy at least the minimum required liability insurance. Depending on the age of the vehicle and its value you may also want to purchase full coverage auto insurance.

If you’re making payments on a vehicle, you will need to carry full coverage auto insurance until the car is paid off. If you buy the car outright, you can choose how much insurance to purchase.

How much car insurance do I need?

The requirements for liability insurance vary from one state to the next. Liability insurance pays for damage and injuries that you cause while operating the insured vehicle. Your insurance company agrees to pay up to the coverage limit for the damage that you cause in the event of a claim. The state will mandate a minimum coverage limit, but you are welcome to purchase additional coverage over that amount.

For example, your state may only require that you buy $10,000 worth of property damage liability. You might choose to buy $50,000 or even $100,000 instead. The higher the limit of liability, the less likelihood that you could ever exhaust your insurance limits; if you cause more damage than your insurance can pay for, you would need to pay for the remaining damage out of your pocket.

In addition to liability insurance, you might want to buy full coverage. This includes collision and comprehensive coverage. Collision pays for damage your vehicle sustains when it’s involved in a car accident; comprehensive pays for damage caused by acts of nature, vandalism and other types of non-accident damage. Both types of coverage require a deductible to be paid out of your pocket before repairs can be completed.

If your vehicle is relatively new or in excellent shape, you will probably want to buy full coverage. Vehicles over 10 years of age, with high mileage or that have depreciated significantly probably do not require full coverage. A good rule of thumb is that if your vehicle costs more to insure for one year than it would be worth to replace, you probably do not need as much insurance on that car.

You should also choose a reasonable deductible. While high-deductible policies are less expensive, the deductible should be significantly less than the value of the vehicle. Otherwise, there is no point in carrying full coverage insurance. You could take the money and invest it toward purchasing a new vehicle instead.

Salvage Title Vehicles

Some older vehicles might be purchased on a salvage title. This means that the car has been in an accident and was deemed a total loss by the insurance company. In the case of some older vehicles, the car may still be repairable; the original owner may have chosen to repair the vehicle with its settlement money and retain it on a salvage title.

While there is nothing wrong with owning a vehicle with a salvage title, you should be aware that you cannot purchase full coverage insurance for such a car. Since an insurance company has already totaled out the car, it is essentially worthless from an insurer’s point of view. You can still drive the vehicle and carry liability insurance, but you will not be able to pursue repairs for the vehicle from your insurance company.

Whether you choose to buy an older vehicle as an economic choice or simply have inherited an older car from a friend or family member, it’s important to purchase the right type of auto insurance to suit your needs. Buy purchasing an appropriate amount of auto insurance for your vehicle, you can guarantee that the car carries the necessary coverage without costing more than it’s worth to insure.

If you have any questions about your car insurance or aren’t sure what you should be paying for coverage, you can check with your agent; you can also shop for free quotes online to see what other companies might cost for a similar policy.

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