Auto insurance for an owned vehicle
If you’ve gone through the process of purchasing a vehicle, you understand it can be a pretty big deal. You officially own your vehicle and no longer have to worry about monthly payments, car loans, or annoying lease agreements. But the big thing that comes with owning a car is deciding how to insure it. If you have a lease or a loan on the vehicle, you’re sharing ownership with a dealership or bank and thus need to make sure it’s probably insured. But, if you own the vehicle, you have some freedom when it comes to insurance that can save you money. Let’s explore.
Table of contents:
Your loan is paid off... should you change your insurance coverage?
Paying off your loan and officially owning your vehicle is a big step. You can remove your additional interest/loss payee from your insurance information and don’t have to worry about paying any car payments. In terms of insurance, what happens next is really up to you. Since your vehicle is owned-outright, you have some flexibility when it comes to determining how much coverage your car needs. Unlike loaned or leased cars, you are not at the mercy of lienholders or lenders that mandate full coverage on the car, for as long as you're making payments.
If your vehicle is still relatively new, you’ll probably want to keep all your coverage to protect your asset. In the event you want to buy a newer vehicle and start this loan/purchasing process over again, the sale of your original car could be used to make a down payment. So, you’ll want to maintain physical protection (your collision and comprehensive coverage) to protect it — these coverages are recommended as long your vehicle retains a worth of at least $4,000.
If you’re uncertain and looking for ways to cut insurance costs, you could consider if the value of your owned vehicle is worth the premium it costs to insure it. Here’s how to tell:
- Determine the value of your vehicle through NADA or Kelley Blue Book
- Speak with your insurance company and ask them how much additional premium it costs to have physical protection to your vehicle.
- If the value of the vehicle is less than the premium determined in step 2, you could feasibly remove this coverage.
When should you drop full coverage on your car?
However, if the difference weighs in favor of keeping the coverage, you could consider raising your deductible. Your deductible and your premium are inversely related — meaning, if you raise your deductible, you lower your premium. Below, you can see how raising or lowering your deductible affects your premium. On average, premiums decreased by about 10% when increasing from a $500 deductible to a $1,000 deductible.
ANNUAL AVERAGE CAR INSURANCE RATES BY COVERAGE LEVEL
| Company | State Minimum Liability Only | Difference | $500 Deductible | $1,000 Deductible |
|---|---|---|---|---|
| Allstate | $641 | $2,034 | $2,675 | $2,471 |
| GEICO | $510 | $1,516 | $2,026 | $1,783 |
| Farmers | $475 | $1,552 | $2,027 | $1,892 |
| Liberty Mutual | $876 | $596 | $1,472 | $1,306 |
| Nationwide | $599 | $1,174 | $1,773 | $1,605 |
| Progressive | $602 | $1,108 | $1,710 | $1,538 |
| State Farm | $328 | $1,205 | $1,533 | $1,492 |
| USAA | $342 | $896 | $1,238 | $1,120 |
By doing this, however, you assume greater financial responsibility in the event you need to file a comprehensive or collision claim — which isn’t always a bad thing. While many people assume you should always file a claim if you’ve damaged your vehicle, you can seriously impact your insurance record and premium. Your collision coverage should be used conservatively because the use of it is usually considered an at-fault accident. Meaning, your rate will increase as most companies charge (rate) you for accidents and violations for three years. Your best bet is to get an estimate prior to contacting your insurance company.
How to save on auto insurance
In addition to considering if your additional coverage is necessary, we have some other savings options to consider for you and your owned vehicle. Let’s get to it.
Get on the right payment plan
By this, we are referring to how much you could save by changing how you pay your car insurance bills. If you’re paying by credit card on a monthly payment plan, you could save $22 a year by switching to using your bank account. Moreover, if you’re able to, paying your full premium upfront can save you $69 a year.
ANNUAL SAVINGS BASED ON METHOD OF PAYMENT
| Paid in Full Savings | Savings with EFT |
|---|---|
| $69 | $22 |
Bundle your policies
Keeping all of your insurance policies under one company can lower your auto insurance premium by between $77 and $138 per year. Most larger insurance carriers have renters, home, condo, and umbrella policies available to purchase and bundle with your auto policy.
SAVINGS VIA BUNDLING
| Savings with Renters | Savings with Home |
|---|---|
| $77 | $138 |
Drive safely
As we stated, any infraction ranging from a speeding ticket to an accident will be chargeable for three years. Because of this, driving safely and avoiding any unnecessary claims are imperative. You would not only face some stiff bills but lose out on discounts like Safe or Good Driver savings.
AVERAGE INCREASE IN SIX-MONTH PREMIUM
| Accident/Violation | Six-Month Premium Increase |
|---|---|
| None | |
| Speeding 11 - 15 MPH Over Limit | $154 |
| Speeding 16 - 20 MPH Over Limit | $171 |
| Speeding 21 - 25 MPH Over Limit | $191 |
| At-Fault Accident | $309 |
| Reckless Driving | $517 |
| Racing | $542 |
| DUI | $543 |
Consider telematics
Telematics are in-car devices that, after about six months of monitoring, create a profile based on your driving habits. So if you drive cautiously, you could see some savings. While this program isn’t available in every state — it's still a growing feature of the insurance industry — here are some estimates from top insurance companies.
| Company | Estimated Savings |
|---|---|
| Progressive's SnapShot | Average of $130 |
| Allstate's Drivewise | Average of 10-25% |
| State Farm's Drive Safe & Save | Up to 15% |
| Esurance's DriveSense | Varies |
| Nationwide's SmartRide | Up to 40% |
| Liberty Mutual's RightTrack | Average of 5-30% |
| GEICO's DriveEasy | Varies |
Always compare rates
Your insurance rate changes any time you get a quote. So, if you move, have a birthday, or like in this situation, pay your car off, you should look around to see if you could get be getting a better offer elsewhere. Do that here with us by entering your zip code below.
Compare rates from popular insurance companies!
About The Zebra
The Zebra is not an insurance company. We publish data-backed, expert-reviewed resources to help consumers make more informed insurance decisions.
- The Zebra’s insurance content is written and reviewed for accuracy by licensed insurance agents.
- The Zebra’s insurance content is not subject to review or alteration by insurance companies or partners.
- The Zebra’s editorial team operates independently of the company’s partnerships and commercialization interests, publishing unbiased information for consumer benefit.
- The auto insurance rates published on The Zebra’s pages are based on a comprehensive analysis of car insurance pricing data, evaluating more than 83 million insurance rates from across the United States.