A car is a big investment that can give you the freedom to travel, explore, and enjoy your independence. But purchasing a car can be expensive, especially if you’re looking to finance the purchase—most companies require an auto insurance minimum or full coverage for a financed car. Here’s everything you need to know about car insurance requirements before financing a car.
What is the Minimum Full Coverage for a Financed Car?
The minimum coverage for a financed car is the amount of insurance you need to meet the requirements set by your lender. This helps to ensure the car is protected against damage and loss.
Often, the minimum is full coverage for financed cars, which includes:
- Liability Coverage: This covers any damages or injuries you cause to others while driving your financed car.
- Collision Coverage: This covers repairs for damage to your car if you are in an accident.
- Comprehensive Coverage: This covers damages to your car from non-collision events such as theft, vandalism, or natural disasters.
What If I Don’t Get Full Coverage?
Even though the minimum is full coverage for financed cars, some lenders may allow you to opt for liability-only coverage. However, this is not recommended as it puts both you and your car at risk with the following possible consequences:
- All car accident repairs will be paid out-of-pocket
- If your car is totaled, you’ll still have to make payments on a car that no longer exists
- You could be sued for damages or injuries caused by an at-fault accident
Additional Insurance Options to Consider
Apart from the minimum full coverage for financed cars, you may want to consider other types of insurance to further protect your investment. Discuss these options with your lender and insurance provider to determine the best coverage plan for your financed car:
Gap Insurance
This covers the difference between your car’s current value and the amount you owe if it is totaled or stolen.
Mechanical Breakdown Insurance
This covers repairs for mechanical failures not caused by an accident, such as engine or transmission issues.
Uninsured/Underinsured Motorist Coverage
This protects you in case of an accident with a driver who does not have insurance or enough coverage to pay for damages.
Does Car Insurance Cost More for a Financed Car?
In most cases, yes. Since a financed car is considered a greater risk, insurance companies will charge higher premiums than for a car paid in full. However, there are potential ways to lower your insurance costs:
- Choose a car with high safety ratings
- Keep a good credit score
- Bundle your car insurance with other types of insurance
- Ask about discounts for safe driving or low-mileage
What Is the Minimum Deductible for a Financed Car?
A minimum deductible is the amount you must pay out-of-pocket before your insurance coverage kicks in. The minimum typically ranges from $500 to $1,000.
For example, if you have a deductible of $500 and your car sustains damages worth $1,500 in an accident, you will be responsible for paying $500 of the repair costs while your insurance covers the remaining $1,000.
Enlist Auto Insurance With Bethany Insurance Agency
Looking for the right insurance coverage for your financed car can be overwhelming, especially with all the different options and requirements. At Bethany Insurance Agency, our experienced agents will work with you to find a minimum full coverage plan for your financed car that fits your needs and budget. Contact us today to learn more about our insurance services and get a free quote.
