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Used Car Insurance: Your Buying Guide for 2021

Used vehicles need auto insurance just as much as new cars. After all, a used car can cause just as much damage as a new car. In fact, you will most likely need proof of insurance to buy your used car in the first place. While two states do not require their drivers to carry any auto insurance, every other state has a minimum amount of coverage that is stipulated by law: If you drive a used car, you'll have to buy the required coverage.

How much your auto insurance costs partly depends on how much insurance you buy, and some used-car owners elect to purchase add-on insurance, including full coverage and uninsured motorist insurance. However, your insurance rate depends on other factors, including the age, make and model of the preowned car itself and your own overall risk profile.

A used car needs insurance just as much as a brand-new car.

Here's everything you need to know about buying auto insurance for a used car and how to save money doing it.

Do Used Cars Need Auto Insurance Coverage?

Unless your vehicle is registered in New Hampshire or Virginia, your vehicle is required by law to have auto insurance coverage. A used car requires car insurance just as much as new vehicle. In fact, you won't be able to drive your car home from the dealership without auto insurance coverage. Of course, if you're buying a used car from a private seller and paying cash, the private seller won't care if you have an existing policy as much as the police, who may stop you.

What Happens If I'm Caught Without Car Insurance?

Driving without car insurance means penalties, and these penalties are much harsher for an uninsured motorist who causes an accident. If you are pulled over for a routine traffic stop and law enforcement discovers you have no insurance, the following sanctions are not uncommon for a first offense:

  • A $500 fine
  • Suspension of license and registration until proof of insurance is produced
  • Impoundment of vehicle
  • Community service or jail time
  • SR-22 requirement

Every state has its own particular laws. In Georgia, for instance, a first-offense uninsured driver could get a $1,000 fine, a 60-day license and registration suspension, a one-year jail sentence and a three-year SR-22 requirement. It is important to remember that the other driver's auto insurer may sue you.

Liability Insurance for a Used Car vs a New Car

If you are thinking about buying a used car, you are not alone: More than 3 million U.S. consumers bought used vehicles in summer 2021, according to Kelley Blue Book (KBB). And it's easy to see why used cars are an attractive purchase: After all, used cars had an average price of $25,500, notes KBB, while new cars had an average price of $42,736.

Not only are used and new vehicles both required to have car insurance, they are both required by law to have the exact same amount of car insurance. In short, every state (except for New Hampshire and Virginia) has its own minimum requirements for liability insurance, which pays for the injuries and property damage an at-fault policyholder causes others. Obviously, a used car can cause just as much injury and property damage as a new car.

Some states require not only liability insurance but also uninsured motorist protection and personal injury protection (PIP) or medical payments coverage (MedPay). In Massachusetts, for example, drivers of newly purchased car or older car must purchase the following amounts of auto coverage for the following types of auto coverage:

  • $20,000 bodily injury liability per person
  • $40,000 bodily injury liability per accident
  • $5,000 property damage liability per accident
  • $20,000 uninsured motorist coverage per person
  • $40,000 uninsured motorist protection per accident
  • $8,000 personal injury protection

These limits apply to used and new cars. Find out your state's mandated requirements, minimum amount of auto coverage and average rates.

How Much Does Insurance Cost for a Used Car?

Car insurance rates are based, in part, on the age, make and model of a vehicle as well as its safety features, anti-theft devices and annual mileage.

A used car is cheaper than a new car, but the insurance may cost more.

Let's look at how the age of an older car, for example, can affect the cost of auto insurance. A new car is sold, on average, after about eight and a half years, according to automotive research firm iSeeCars.com.

Insuring a used vehicle that is almost nine years old has advantages and disadvantages:

  • Since the vehicle has depreciated in value, its car insurance coverage may cost less than a new car's car insurance cost because an old car is cheaper to replace than a new car.
  • An older used car, especially a classic car, may cost more to insure than a new car because an older car's parts may be harder to find and thus more expensive.
  • Since a used vehicle may not have the latest safety features and anti-theft devices, it may not be eligible for certain safety and anti-theft discounts that can lower your car insurance rate. For example, only 15% of older cars have blind-spot monitors.
  • The most common safety and anti-theft features have been around for longer than eight and a half years. For example, federal law has required front airbags in all new passenger vehicles since 1999. Further, car manufacturers have installed cellular or GPS tracking systems—that is, anti-theft devices—in their vehicles since 2010.
  • While a new vehicle will usually get full coverage (that is, collision and comprehensive insurance), you will probably not need full coverage for a used car worth about $4000 or less.
  • If you used an auto loan to finance your newly purchased used car, your lender will probably require full coverage to protect its investment.

Get a Cheap Full Coverage Insurance

Is Proof of Insurance Needed To Buy a Used Car?

You need auto insurance when buying a used car, and your auto insurance ID card is your "proof of insurance." Of course, as you peruse the used-car market, you should be perusing auto insurance policies, auto insurance rates and car insurance quotes.

If you know which used vehicle you're going to purchase and you have the vehicle identification number, the make, model, year, mileage and package options, you can purchase an auto insurance policy online. Most insurers will provide instant coverage once you make an initial payment.

How Much Used-Car Insurance Do I Need?

How much auto insurance you purchase from an insurance provider is a major factor in how much your car insurance policy will cost. While every used-car driver will have to purchase their state's mandated minimum coverage (liability insurance and, in some states, uninsured motorist protection and personal injury protection), the used-car driver may consider incorporating some add-on auto insurance options to customize the car insurance policy.

Here are some insurance coverages you might want to consider:

Collision and Comprehensive (Full Coverage)

Collision coverage covers damage to your car, no matter who was at fault for the accident. Collision coverage also insures against impacts with objects (a sign, a fence) or another vehicle.

Comprehensive coverage will pay for a replacement vehicle if your car is stolen. Comprehensive also insures against damage that does not result from a collision, including fire, vandalism, and hail, tree branches and other falling objects.

Generally speaking, if you buy a used car, you should not bother with comprehensive and collision insurance if the cost is more than 10% of the value of your vehicle. If your car is less than 10 years old or worth more than $3000, getting comprehensive and collision coverage may be a prudent move.

Full coverage is recommended for newer vehicles.

If you finance your preowned car, lenders will require you to get full coverage car insurance to protect their investment.

Uninsured/Underinsured Motorist

One out of eight U.S. drivers do not have their state's mandated minimum amount of car insurance, according to the Insurance Information Institute (III). Uninsured/underinsured motorist coverage will pay for your injuries and car damage if you are in an accident caused by a hit-and-run driver or a driver who has no insurance or not enough insurance. Some states require it, and even when it's not required it provides peace of mind.

Gap Insurance

Gap insurance helps pay off your car loan if your preowned car is totaled or stolen and you owe more on your loan than the car's depreciated value. Gap insurance is generally not associated with used cars and many used cars are not eligible for it. But if you have a used car that is fairly new or you took out a loan, you may want to see if you can buy this coverage.

Car Insurance Rates Are Based on Many Factors

Auto insurance companies not only look at the vehicle but also the insurance customer, including their age, gender, marital status, place of residence, driving record, lapses in insurance and, in some states, credit score. Also, auto insurance rates vary from state to state, from insurance company to insurance company. As you can see, there are too many variables to give any hard-and-fast answers about the cost of used-car insurance. But if you are looking for cheap car insurance quotes, comparison shopping is the best way to save money on you car insurance policy.

Compare Insurance Rates for Used Cars

Whether you're looking for a new car insurance policy for a recent car purchase or you're looking to purchase coverage from a totally new carrier, shop around to find the right used-car insurance at very affordable insurance prices.

Reasons To Compare Auto Insurance Quotes:

  • You're a young driver, and you want to buy a used car.
  • You need to buy your state's basic mandated liability coverage for your used vehicle, but you're worried about how your poor credit score or driving record will affect your liability coverage premium.
  • You're wondering how much add-on comprehensive and collision coverage will increase your total used-car insurance cost.
  • You're unhappy with your current auto insurance provider's rates and you want to lower your used-car insurance cost.

If you're shopping around for a preowned vehicle and finally find two or three cars that you like, take down the vehicle identification number of each car: SmartFinancial can compare your multi-policy insurance rate, finding the best, cheapest auto insurance based on your driving profile.

Buying a Used Car? Find the Right Auto Insurance Policy for You

Used cars need to have the same amount of state-mandated minimum insurance as new cars. While a used car typically costs less than a new vehicle, used-car insurance rates for some used cars can actually be higher than coverage for a new vehicle. But car insurance companies look at many factors when calculating insurance rates, and the age, make and model of your used car are just three of them—so there's always room to find affordable auto coverage or coverage that's cheaper than your existing insurance policy.

SmartFinancial's licensed insurance experts can find the best, cheapest auto insurance in your area and help you to decide what add-on insurance products makes sense for the value of your preowned vehicle, your lifestyle and budget. Enter your zip code below to compare all the auto insurance rates in your area or call 855-214-2291 for a live consultation.

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