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Used car insurance: A buyer's guide

minute read

    While buying insurance for a used car isn’t vastly different from buying insurance for a new car, there may be some specific considerations to bear in mind. Let’s learn more.

    Do you need insurance to buy a car?

    Most states require drivers of new or used cars to have some type of car insurance. However, the exact minimum requirements can vary. Additionally, in many states, you may even need to provide proof of insurance before a dealership can let you legally drive away with the car.

    Nearly all states require at least auto liability coverage for property damage, and most states require some level of coverage for personal injury or bodily injury to others. Always consult your local DMV for latest guidelines.

    Common types of car insurance coverage

    There are many coverage options to consider when purchasing car insurance for a new or used vehicle. Here are some options available, but you may want to consult with your insurer to determine the coverages most suitable for you.

    • Auto Liability coverage: There are two types of liability coverage: Bodily Injury liability and Property Damage liability. These coverages help pay the costs related to another person’s injuries or property as a result of an accident you caused. There are a variety of other coverages designed to protect you and your passengers when you are injured in an accident.
    • Collision and comprehensive coverage: Collision and comprehensive coverage can help pay for physical damage to your car. Collision coverage typically covers damage related to another car or object hitting you. Comprehensive coverage covers other types of physical damage not covered by collision insurance, such as flood and fire damage or acts of vandalism. These policies are typically considered optional, though they may be required in some cases (or by some lenders).
    • Gap coverage: Gap insurance is another type of optional coverage that lenders may sometimes ask you to get. If your leased or financed car is ever totaled in an accident, gap insurance helps cover the potential difference between the car’s value and the loan balance.

    Costs of insurance: Used cars vs. new

    Used cars are typically worth less than new ones, thanks to depreciation (with the notable exception of rare or classic cars). As such, insurance for used cars may also cost a little less than for a new car.

    It may also be helpful to understand that the age of a car is only one of several factors insurers evaluate to determine your rates. The make and model of your car can play a big role in what you pay, as some models may be less expensive to insure than others. Cars with better security features, for instance, might qualify for some discounts that other cars don’t.

    Your own history as a driver, as well as personal factors like your age, sex and where you live, will also help determine your rates. Combined, these factors can have a potentially greater influence on your insurance rates than the age of your car.

    Finally, as mentioned, there’s the level of coverage you choose to purchase. Insurance plans with additional types of coverage will typically cost more than plans offering the legal minimum, regardless of whether it's for a used car or a new one.

    Saving money when buying used car insurance

    When you’re finding insurance for your used car, you’re likely looking to get the best deal possible. The following tips may help you save some money:

    Shopping around for rates

    Shopping around for rates can help you compare different insurers, each of whom have their own way of determining your rates. This way, you have a better chance of finding an insurance policy to suit your needs at a price that won’t break the bank.

    Bundling insurance packages

    Many insurers offer customers discounts for getting other forms of insurance through them as well. You might get discounts for bundling your home, auto and even recreational vehicle insurance together. In many cases, you might not have gotten these savings by purchasing each one independently.

    Asking for applicable discounts

    Silence may be golden in some contexts, but when it comes to getting discounts, it can help to speak up. Many insurers offer additional discounts for seniors, students, veterans, first responders and more. You may end up saving a little bit just by inquiring if you qualify for any discounts.

    In summary

    Buying insurance for a used car isn’t particularly different from buying insurance for a new car. Used cars may occasionally be a little cheaper to insure, but the age of your car is just one of several factors determining your rates. Ultimately, you’ll need to consider the level of coverage you want, shop around for the best rates and then make the decision that works for you.

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