When it comes to buying a used car, financing is often the go-to option for many people. However, once you’ve secured financing for your vehicle, you might wonder if you need full coverage insurance or if you can get by with just the minimum required coverage. In this article, we will discuss the importance of having full coverage on a used financed car and why it’s a smart choice.
Understanding Full Coverage Insurance
Full coverage insurance typically includes both comprehensive and collision coverage in addition to the state-mandated liability coverage. While liability coverage is required by law, comprehensive and collision coverage are optional. However, when you have a used car that is still being financed, it is generally recommended to opt for full coverage to protect your investment.
The Benefits of Full Coverage
1. Protection against damage: Full coverage insurance provides financial protection in case of damage to your car due to accidents, theft, vandalism, or natural disasters. Without it, you would have to bear the cost of repairs or replacement out of your own pocket.
2. Loan requirements: Many lenders require borrowers to have full coverage on financed vehicles. This is because the lender wants to ensure that their investment is protected in case of any unforeseen circumstances that could result in the loss of the vehicle.
3. Peace of mind: Having full coverage insurance on your used financed car gives you peace of mind knowing that you are financially protected in case of any mishaps. Accidents can happen to anyone, and having the right insurance coverage can save you from a major financial burden.
The Cost Factor
Some people may be hesitant to opt for full coverage due to the additional cost it incurs. While it’s true that full coverage insurance tends to be more expensive than just liability coverage, the benefits and protection it offers are well worth the investment. Additionally, there are ways to reduce the cost of your insurance premium, such as increasing your deductible or bundling your insurance policies with the same provider.
Alternatives to Full Coverage
If you are still unsure about whether to opt for full coverage, there are a couple of alternatives you can consider:
1. GAP insurance: Guaranteed Asset Protection (GAP) insurance covers the difference between what you owe on your car loan and the actual cash value of your car. This can be useful if your car gets totaled and the insurance payout falls short of paying off your loan.
2. Liability-only coverage: If you own your used financed car outright and it has a low market value, you may consider liability-only coverage. However, keep in mind that you will not be protected against damages to your own car in case of an accident.
Conclusion
While it may be tempting to opt for just the minimum required insurance coverage on your used financed car, having full coverage is a wise decision. It provides comprehensive protection against various potential risks and ensures that you are not left with a hefty financial burden. Remember, accidents can happen to anyone, so it’s essential to have the right insurance coverage in place to protect your investment.
