How to Insure Your Used Car the Right Way
Last Updated on November 23, 2022
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.
How Much Coverage Does a Used Car Need?
The amount of coverage you need depends on two primary factors:
- Your state minimums
- Your contractual obligations (from your lender or bank)
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:
- Liability – Liability 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 must pay out-of-pocket for any costs that exceed your insurance coverage.
- 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.
- Comprehensive – This is the catch-all that covers those incidents like storms, vandalism, or theft.
- 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.
- 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 hits 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) includes 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. 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 Company | Rates for a Used Car | Rates 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 expensive used cars to insure (Source – Insure.com):
| Cheapest Used Cars to Insure | ||||
| Rank | Year | Make | Model | Average Annual Premium |
| 1 | 2006 | Honda | Odyssey LX | $922 |
| 2 | 2006 | Chrysler | Town & Country | $923 |
| 3 | 2006 | Dodge | Caravan SE | $925 |
| 4 | 2007 | Honda | Odyssey LX | $936 |
| 5 | 2007 | Dodge | Caravan SE | $937 |
| 6 | 2007 | Chrysler | Town & Country | $944 |
| 7 | 2008 | Honda | Odyssey LX | $952 |
| 8 | 2006 | Ford | Escape XLS | $956 |
| 9 | 2006 | Jeep | Wrangler SE | $957 |
| 10 | 2006 | Ford | Escape XLS | $958 |
| Most Expensive Used Cars to Insure | ||||
| Rank | Year | Make | Model | Average Annual Premium |
| 1 | 2018 | Mercedes | S65 AMG | $3,890 |
| 2 | 2017 | Dodge | GTS Viper | $3,779 |
| 3 | 2018 | Mercedes | S63 AMG | $3,670 |
| 4 | 2017 | Mercedes | S63 AMG | $3,624 |
| 5 | 2018 | Mercedes | Maybach S650 | $3,558 |
| 6 | 2017 | Maserati | Quattroporte GTS | $3,547 |
| 7 | 2018 | Porsche | Panamera S | $3,545 |
| 8 | 2018 | BMW | M6 Gran Cuope | $3,493 |
| 9 | 2018 | BMW | AlpinaB7 XDrive | $3,465 |
| 10 | 2018 | BMW | I8 | $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 finding premiums you can afford.
Car insurance can be expensive, but fortunately, there are plenty of ways to 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. Ask your provider for a list of discounts they provide to make sure you are unlocking all potential saving opportunities.
- 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.
- 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.
