Compare Car Insurance Rates
Get matched with a top provider and compare instant quotes in just a few clicks
Secure. Fast. Free.
What Is Full-Coverage Car Insurance?
Full-coverage car insurance usually refers to a policy that includes the state-minimum coverage and adds at least collision and comprehensive insurance. To drive in every state (except Virginia and New Hampshire), you need to hold at least your state’s minimum insurance requirements.
Most states require bodily injury liability (BI) and property damage liability coverage (PD), though some also require uninsured/underinsured motorist coverage (UM/UIM), personal injury protection (PIP) or medical payments coverage (MedPay).
Typically, full-coverage policies include six main types of coverage:
| Type of Coverage | What It Covers |
|---|---|
| Liability insurance | Covers another party’s property damage or bodily injury resulting from an accident you’re at fault for |
| Collision insurance | Covers damage to your vehicle, regardless of who’s at fault for an accident |
| Comprehensive insurance | Covers damage to your vehicle due to theft, vandalism, natural disaster or other non-collision events |
| Personal injury protection (PIP) | Covers medical expenses, lost wages and funeral costs for you and your passengers after an accident, regardless of who’s at fault |
| Medical payments coverage (MedPay) | Covers medical bills and funeral costs for you and your passengers after an accident, regardless of who’s at fault |
| Uninsured/underinsured motorist coverage (UM/UIM) | Covers damage to your property or bodily injuries you and your passengers sustain from an accident with a driver who doesn’t have car insurance or doesn’t have enough coverage |
Some full-coverage insurance policies also include gap insurance, which can help pay your car loan off in the event of a total loss. This coverage is generally optional, and not all insurance companies offer it. Some lenders require drivers to hold gap insurance for the duration of their auto loans.
When we polled 1,000 consumers about their auto insurance in 2022, 67% reported having full coverage.
Source: Progressive
How Much Does Full-Coverage Insurance Cost?
According to Quadrant Information Services, the average annual cost of a full-coverage insurance policy is $1,730. The table below shows average premiums for a 35-year-old married driver with good credit and a clean driving history.
| Car Insurance Company | Average Monthly Cost | Average Annual Cost |
|---|---|---|
| USAA | $88 | $1,054 |
| Erie Insurance | $103 | $1,238 |
| Nationwide | $107 | $1,281 |
| Geico | $109 | $1,308 |
| Auto-Owners Insurance | $111 | $1,337 |
| State Farm | $123 | $1,481 |
| American Family Insurance | $128 | $1,537 |
| Progressive | $134 | $1,611 |
| Travelers | $139 | $1,669 |
| Allstate | $174 | $2,088 |
Do I Need Full Coverage on a Financed Car?
Most lenders will require you to carry a full-coverage auto insurance policy because your vehicle is the collateral for your loan. Liability insurance only covers property damage and medical expenses for other parties when you’re at fault for an accident. If your car is stolen or totaled and you don’t have full coverage, you’ll still need to pay off the loan for a vehicle you no longer have.
Once you’ve paid your vehicle off, you can decide whether to drop certain coverages and get a liability-only policy. Depending on your circ*mstances and where you live, you may decide full coverage is best for you.
Full coverage is more expensive than your state’s minimum liability limits, but the benefits of having full coverage are clear. If you’re involved in an accident or your car is stolen, a liability-only policy won’t cover your repair bills or help you get a new car. If you have a new car, you may want to consider getting new car replacement insurance.
What Happens if I Don’t Have Full Coverage on My Financed Car?
If you buy a minimum-coverage policy for a financed vehicle, you may be in violation of your loan contract. This means your lender is legally allowed to cancel your auto loan and repossess the vehicle.
If you don’t purchase the lender-required insurance when you buy your car, your loan contract may give the lender the right to insure the vehicle. This is called force-placed insurance. The insurance protects the lender, but you’re required to pay for it. These policies are generally much more expensive than insurance you purchase on your own.
What To Do When You’ve Paid off a Financed Car
Once you’ve paid your vehicle off, you’re no longer subject to any insurance requirements other than your state’s minimums. If you want to drop some types of coverage to save money, that’s up to you. Either way, have your insurer remove the lender as a lienholder on your policy. This makes both the insurance shopping and claims processes easier.
If you decide to shop around for better or cheaper coverage, there are a few steps you should take. They include:
- Compare car insurance quotes from several providers: You’ll have a better idea of what you’re likely to pay, and you can select a company that offers a policy within your budget.
- Look for car insurance discounts: Many companies offer opportunities to save by bundling your auto and homeowners insurance, maintaining good driving habits or adding another vehicle to your policy.
- Adjust your coverage levels: Depending on factors such as your location and your car’s value, you may decide to drop collision or comprehensive coverage to lower your insurance premium.
- Adjust your deductible: Many policies allow you to select the deductible you want to pay when filing an insurance claim. A higher deductible usually gets you a lower premium and vice versa.
Do I Need Full Coverage on a Financed Car?: Conclusion
If you use an auto loan to buy a new or used vehicle, it’s highly likely that the lender will require you to purchase a full-coverage policy. This covers you and your car in many instances that could result in property damage or bodily injury. It also protects the lender’s investment. In some cases, you’ll also need to have gap insurance.
If you decide not to hold full coverage on a leased car, you might be violating your loan contract. The lender can then get force-placed insurance or repossess your car.
Top Auto Insurance Recommendations
If you’re looking for a full-coverage policy when purchasing a financed car or looking to change your coverage levels after paying your car off, we recommend getting quotes from multiple providers. That way, you’ll have a better sense of what you might pay. Sourcing quotes from Geico and Progressive is a great way to start your search.
Geico: Affordable for Most Drivers
Geico is the second largest insurance provider in the nation. Policyholders praise the company’s customer service and easy claims process. Based on our research, Geico tends to offer below-average rates for full-coverage auto insurance with opportunities like DriveEasy to save even more. In addition to the six standard types of insurance, Geico has optional coverages such as mechanical breakdown insurance and roadside assistance.
Read more: Geico insurance review
Progressive: Low Rates for High-Risk Drivers
Progressive has a reputation for offering some of the most affordable rates for people typically considered high-risk drivers. For those looking to improve their driving habits, Progressive’s telematics insurance program, SnapshotⓇ, is a good choice. It monitors how you drive and rewards good practices with discounts.
Progressive also offers many other discounts to keep insurance costs lower, including savings for good students and customers with more than one car on their policies.
Read more: Progressive insurance review
FAQ
Neglecting to carry a full-coverage policy on a financed car would probably violate your loan contract. In that case, the lender could repossess your car. It may instead opt to get force-placed insurance, which generally costs you much more than coverage you’d find on your own.
Most lenders won’t let you cancel your car insurance until your vehicle is paid off. If you change insurance providers, let your lender know. Have your existing and new policies overlap for at least a day so you don’t have a lapse in coverage or violate your agreement with your lender.
Whether your car is financed or paid off, you’ll still need to meet your state’s minimum insurance requirements.
Not paying your car insurance premium could result in the outstanding balance being sent to collections. Having debts go to collections will show up on your credit report and will lower your credit score.
Your insurance provider would probably cancel your policy after a number of missed payments, so you’d have a lapse in coverage. This would make it harder for you to find affordable coverage in the future.
Our Methodology
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.
Here are the factors our ratings take into account:
- Cost: Auto insurance rate estimates generated by Quadrant Information Services and discount opportunities were both taken into consideration.
- Coverage: Companies that offer a variety of choices for insurance coverage are more likely to meet consumer needs.
- Reputation and experience: Our research team considered market share, ratings from industry experts and years in business when giving this score.
- Availability: Auto insurance companies with greater state availability and few eligibility requirements scored highest in this category.
- Customer experience: This score is based on volume of complaints reported by the NAIC and customer satisfaction ratings reported by J.D. Power. We also considered the responsiveness, friendliness and helpfulness of each insurance company’s customer service team based on our own shopper analysis.
Our credentials:
- 800 hoursresearched
- 45 companiesreviewed
- 8,500+ consumerssurveyed
*Data accurate at time of publication.
If you have questions about this page, please reach out to our editors at editors@marketwatchguides.com.
