How to Insure Your Used Car the Right Way

Last Updated on June 30, 2020

Purchasing a pre-owned vehicle and insuring it is not the same as if you were to drive off the lot with a brand-new car.

You should always consider how much it will cost to insure a used car before you sign any paperwork and actually buy one. If you already have a pre-owned vehicle you want to insure, knowing the ins-and-outs of the insurance process can help you save.

First off, you should know what type of coverage a used car needs and how much coverage it needs. Then, once you’re ready to buy coverage, you need to flex your buying power and exercise a few insider tips so that you can decrease your annual premiums. Continue reading below to learn everything you need to know about insuring a used car.

used car insurance

How Much Coverage Does a Used Car Need?

The amount of coverage you need depends on two primary factors:

You cannot escape state minimum insurance. If you do, you will not like the consequences (which may include criminal charges). Therefore, check your state’s insurance department to see what the minimum coverage is that you need to purchase.

While you can slap on the minimum coverage, you also have contractual obligations that can hold you back from the minimum. Contractual obligations come from lenders. Not all used cars are purchased in full, and if you financed your vehicle, the finance paperwork has strict terms for the amount of insurance and types of coverage you need on that car.

If you are not sure, contact your lender about the minimum coverage required before assuming the state minimums will do.

The Various Types of Coverage

You have five primary types of coverage that you should include in the cost of your vehicle (when analyzing your monthly car purchasing budget). These five types of coverage include:

  1. LiabilityLiability is what covers you if you are in an accident that you caused. It will cover property damage and bodily injuries for the other party in an accident. Your state will have a minimum requirement for liability, and while you could use the minimum, realize that you personally must pay for any costs that exceed your insurance coverage.
  2. Collision Collision covers accidents, including those with a fixed object. It will also replace your used car if it is deemed totaled after an accident.
  3. Comprehensive This is the catch-all that covers those incidents like storms, vandalism or theft.
  4. Personal Injury Protection Depending on your state, you might need PIP insurance. PIP would cover medical costs up to a maximum benefit regardless if you or the other party caused the accident. Not all states have PIP policies even offered to drivers; therefore, see if your state requires it and if an insurer even offers it.
  5. Underinsured and Uninsured Motorist Protection Some states now require this coverage due to the overwhelming number of people with minimum or no coverage. If an underinsured motorist hit you, their insurance company only pays up to their premium (which could be only $10,000 in some states). In this case, you would have no recourse for the remainder. With underinsured and uninsured motorist protection, you have insurance coverage.

Do Not Ignore the Car’s History

Before you buy a used car, you need the car’s history. Critical information that you need to know (and the insurer will look for) include the total loss history on the car and salvage history.

If the used car was previously listed as a total loss or salvaged, insuring it is much more difficult. In fact, most insurers will not offer coverage on these vehicles. When they do, it is minimal and expensive. Likewise, you do not want to invest in a vehicle that has been salvaged – there is no telling how it was repaired and what might be lurking under the hood.

How Much Does it Cost to Insure a Used Car?

The following table shows the average rates, by company, for both new and used cars. The rates are for 6-month policies. As you can see, used vehicles are usually cheaper to insure:

Insurance CompanyRates for a Used CarRates for a New Car
AAA$940$920
Allstate$930$1,210
Farmers$950$930
GEICO$620$700
Liberty Mutual$850$910
Nationwide$610$670
Progressive$780$940
State Farm$660$720
Travelers$840$900
USAA$520$700
Average$770$860

What Are the Cheapest and Most Expensive Used Cars to Insure?

The following table highlights the most and expensive used cars to insure (Source – Insure.com):

Cheapest Used Cars to Insure
RankYearMakeModelAverage Annual Premium
12006HondaOdyssey LX$922
22006ChryslerTown & Country$923
32006DodgeCaravan SE$925
42007HondaOdyssey LX$936
52007DodgeCaravan SE$937
62007ChryslerTown & Country$944
72008HondaOdyssey LX$952
82006FordEscape XLS$956
92006JeepWrangler SE$957
102006FordEscape XLS$958
Most Expensive Used Cars to Insure
RankYearMakeModelAverage Annual Premium
12018MercedesS65 AMG$3,890
22017DodgeGTS Viper$3,779
32018MercedesS63 AMG$3,670
42017MercedesS63 AMG$3,624
52018MercedesMaybach S650$3,558
62017MaseratiQuattroporte GTS$3,547
72018PorschePanamera S$3,545
82018BMWM6 Gran Cuope$3,493
92018BMWAlpinaB7 XDrive$3,465
102018BMWI8$3,460

Tips for Saving on Your Used Car Insurance Premiums

Now that you know what type of coverage you need for your used car and how much it should cost, the next step is to find premiums that you can afford.

Car insurance can be expensive, but fortunately, there are plenty of ways you can save on insurance for a used car.

Some Ways You Can Lower Your Insurance Costs on a Used Car Include:

  • Knowing how the type of car affects insurance. Not all used cars are cheaper to insure. A 2017 Mercedes Benz even with 100,000 miles will cost you more to insure than a 2017 Honda Accord. The style, make, and cost of the vehicle all play a role in determining premiums.
  • Consider replacement value versus how much you would pay in insurance. If you are purchasing a used car in cash, you may need to ask yourself how much coverage you need. If you pay over $10,000 for the car, then carrying insurance might prove beneficial until the value of that vehicle dips lower than insurance premiums. Bottom line, are you ready to replace that car in cash if it were totaled? If not, you might want insurance.
  • Unlock discounts. All insurers have discounts; whether it is for military service, multiple policies, good driving, monitoring programs, or even taking driving classes, there is a chance for savings. See how many options the particular insurer offers and what that could lower your premium too.
  • Think about your driving record. If you have a history of speeding tickets and reckless driving, a used sports car is probably not going to give you a favorable quote for insurance.
  • Think about how often your vehicle is stolen. Certain types of cars are more prone to theft, especially sedans like the Honda Accord and Honda Civic (regardless of the model year). If you have a car with a high propensity for being stolen, and you live in a busy metropolitan area where theft rates are high, you may pay more than you would like.
  • Consider raising your deductible. If you have the cash on hand, it might be beneficial to increase your deductible so that you pay less each year in premiums. Higher premiums save you the hassle of having to pay $1,000 when you have that much in savings and can leave it there, you can save monthly.
  • Pay your premium in one lump sum. The cost to insure a used car is cheaper, so consider paying upfront for the entire year. Most insurance companies will offer discounts when you are willing to pay a year in advance.
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