Do I Need Full Coverage Insurance to Finance a Car? 

When talking with drivers, one of the questions we get the most is, “Do I need full coverage insurance if I financed my car?” The short answer is, probably. 

To help answer this question, here’s an explanation of what full coverage car insurance means and what auto insurance lenders require. For specific questions about the car insurance coverage you need, contact GoAuto Insurance. 

What Is Full Coverage Car Insurance? 

When talking about full coverage auto insurance, it’s important to note that there’s no clear definition for full coverage insurance. It varies from state to state, and companies define full coverage differently. With that in mind, when talking with an insurance company or your lender, always ask them for the specifics of the coverage you need. 

That said, full coverage car insurance usually refers to: 

• The state’s minimum insurance requirements
• Collision coverage
• Comprehensive coverage 

While every state has its own requirements, full coverage auto insurance usually consists of: 

• Liability Insurance pays for the property damage and injuries to others after an accident where you’re at fault. 
• Collision Insurance covers damage to your car after a collision with another vehicle or a stationary object. Collision insurance can be used regardless of who caused the accident. 
• Comprehensive Insurance protects drivers when their car is damaged from an event other than a collision. This includes damage due to natural disasters, theft, or vandalism. 
• Personal Injury Protection (PIP) Insurance covers losses to you and your passengers regardless of who caused the accident. It covers medical expenses, lost wages, and household services costs you incur because of your accident. 
• Medical Payments Coverage (MedPay) Insurance helps drivers cover medical expenses after a covered accident regardless of who was at fault. 
• Uninsured Motorist (UIM) Insurance Coverage protects drivers after an accident caused by an uninsured driver. It will help with property damage and bodily injury after an accident caused by an uninsured or underinsured driver. 

When Do Drivers Need Full Coverage Auto Insurance? 

If you finance your car, you probably will need full coverage auto insurance. When you have a car loan, your vehicle serves as collateral to secure the loan. Because of this, lenders usually require full coverage insurance. 

In addition to full coverage car insurance, in some situations, lenders also require gap insurance. Gap insurance covers the difference between your car’s current value and your loan balance. You should get gap insurance if you put less than 20% down for a car, lease a car, or have a lease term of more than five years. 

When you finance a car, you must show proof of insurance. If you drop your coverage or reduce your coverage, your lender can purchase force-placed insurance. 

Force-placed insurance only protects the lender, but the borrower must pay for it. It is more expensive than the policy you would buy, and it only protects the lender. As a result, if your lender requires full coverage insurance, it’s important to maintain all required coverage. 

Once you’ve paid off your car loan, you can consider reducing your coverage. When doing this, you need to know your state’s minimum car insurance requirements. Before reducing your coverage, talk with a car insurance expert who can help you decide how much coverage you need. 

Contact GoAuto Insurance to Learn More 

To learn more about the car insurance coverage you need, contact an auto insurance expert at GoAuto Insurance. We’ll explain the coverage you need to comply with your state’s minimum requirements and your lender’s requirements. 

We work directly with drivers to help them get the coverage they need without anything extra they don’t need. This allows us to provide affordable auto insurance that meets each driver’s unique needs. 

Call us today to learn more or get a free car insurance quote online.