Mark is a freelance journalist and analyst with over 15 years of experience covering the insurance industry. He has extensive experience creating and editing content on a variety of subjects with deep expertise in insurance and automotive writing. He has written for autos.com, carsdirect.com, DARCARS and Madtown Designs to name just a few. He is also a professional blogger and a skilled web content creator who consistently turns out engaging, error-free writing while juggling multiple projects.
Reviewed by: Laura Longero Executive EditorLaura is an award-winning editor with experience in content and communications covering auto insurance and personal finance. She has written for several media outlets, including the USA Today Network. She most recently worked in the public sector for the Nevada Department of Transportation.
If you have financed a vehicle, your lender will require that you carry full coverage insurance, which includes liability, any other legally required coverages, collision and comprehensive. This ensures the vehicle will be repaired or replaced if damaged or destroyed.
Learn everything you need to know about the requirements for full coverage insurance on a financed car.
Key HighlightsMark is a freelance journalist and analyst with over 15 years of experience covering the insurance industry. He has extensive experience creating and editing content on a variety of subjects with deep expertise in insurance and automotive writing. He has written for autos.com, carsdirect.com, DARCARS and Madtown Designs to name just a few. He is also a professional blogger and a skilled web content creator who consistently turns out engaging, error-free writing while juggling multiple projects.
Reviewed by: Laura Longero Executive EditorLaura is an award-winning editor with experience in content and communications covering auto insurance and personal finance. She has written for several media outlets, including the USA Today Network. She most recently worked in the public sector for the Nevada Department of Transportation.
Table of Contents Table of ContentsYou must carry full coverage insurance if you have a loan or lease on the vehicle. Technically, your financing company owns your car until you make that final payment, so it often requires full coverage to protect its investment.
“When financing a vehicle, the lender usually requires specific types of coverage to protect [its] investment,” says Scott McAlpin, general manager at Airport Chrysler Dodge Jeep in Orlando, Florida. “Comprehensive and collision coverage is often mandatory to protect against damage to the vehicle itself. These requirements aim to ensure that the lender’s financial interest is safeguarded.”
If your vehicle was damaged or destroyed and you are not fully covered by insurance, your lender would have to pursue you for the money to repair or replace your vehicle, which would be more expensive than collecting from an insurance company.
In almost all cases, you must provide proof of insurance to your lender before you can drive the vehicle off the lot.
What is full coverage?Full coverage insurance comprises liability coverage, any other legally required coverage, and comprehensive and collision coverage. Liability protects your financial assets if you are responsible for a car accident that injures other drivers or causes property damage. The collision and comprehensive portion will pay to repair or replace your vehicle if it is damaged or destroyed.
While most states require drivers to carry liability coverage to drive on public roads, liability doesn’t repair your vehicle if you are in an accident – it only protects people and property that you damage with your vehicle.
If you have financed your vehicle, your lender will likely require that you carry full coverage so your car is repaired or replaced after an accident or other incident.
Full coverage car insurance consists of the following:
Because insurers usually require full coverage car insurance for a financed car, coverage can be more expensive than insuring your own car — when insuring your own car, you can choose lower coverage limits to bring down the cost of your insurance.
Full coverage insurance is more expensive than simply carrying liability coverage. The reason? Full coverage means your insurance company is now on the hook for replacing your vehicle if it is destroyed in an accident or other incident.
While carrying full coverage will certainly cost more, it’s not only a requirement from your financing company but also a good idea. Even after your vehicle is paid off, unless you can easily afford to replace it or cover an expensive repair bill, dropping to just liability is not a wise choice.
If your vehicle is old enough that you would not repair it after an accident, that is the time to consider dropping full coverage for liability only.
The cost of car insurance will vary dramatically depending on various factors. Insurers consider your personal risk factors, your ZIP code and information about the vehicle.
According to our 2024 rate analysis, full coverage car insurance costs $1,895 annually, on average.
Like all insurance products, the cost of full coverage will vary depending on numerous factors, one of which is your state. Insurers consider weather, theft and claim rates and other factors when setting a premium, so full coverage rates can vary dramatically.
When it comes to full coverage car insurance, state averages clearly show how much premiums can vary with a shocking 145% difference between the most expensive state (Louisiana) and the cheapest state (Maine) for full coverage.
Louisiana often tops the most expensive car insurance lists due to a legal system that encourages litigation, even for minor accidents. Louisiana also has a higher-than-average car theft rate, which will always raise insurance rates.
Here are the top five most expensive states for full coverage car insurance:
Severe weather (hailstorms and hurricanes), large cities, and high car theft rates are often the reasons that car insurance costs so much in these states.
On the flip side of the full coverage cost spectrum, the least expensive states for full coverage tend to be more rural, leading to fewer drivers on the road and fewer accidents.
The following are the top five cheapest states for full coverage:
Refer to the accompanying table for a detailed comparison of average full coverage car insurance rates by state.
| State | Annual Full Coverage Rates | Monthly Full Coverage Rates |
|---|---|---|
| Alaska | $1,676 | $140 |
| Alabama | $1,860 | $155 |
| Arkansas | $1,957 | $163 |
| Arizona | $1,812 | $151 |
| California | $2,416 | $201 |
| Colorado | $2,337 | $195 |
| Connecticut | $1,725 | $144 |
| Washington, D.C. | $2,157 | $180 |
| Delaware | $2,063 | $172 |
| Florida | $2,694 | $225 |
| Georgia | $1,970 | $164 |
| Hawaii | $1,517 | $126 |
| Iowa | $1,630 | $136 |
| Idaho | $1,428 | $119 |
| Illinois | $1,532 | $128 |
| Indiana | $1,515 | $126 |
| Kansas | $1,900 | $158 |
| Kentucky | $2,228 | $186 |
| Louisiana | $2,883 | $240 |
| Massachusetts | $1,726 | $144 |
| Maryland | $1,746 | $146 |
| Maine | $1,175 | $98 |
| Michigan | $2,266 | $189 |
| Minnesota | $1,911 | $159 |
| Missouri | $1,982 | $165 |
| Mississippi | $2,008 | $167 |
| Montana | $2,193 | $183 |
| North Carolina | $1,741 | $145 |
| North Dakota | $1,665 | $139 |
| Nebraska | $1,902 | $159 |
| New Hampshire | $1,265 | $105 |
| New Jersey | $1,902 | $159 |
| New Mexico | $2,049 | $171 |
| Nevada | $2,060 | $172 |
| New York | $1,870 | $156 |
| Ohio | $1,417 | $118 |
| Oklahoma | $2,138 | $178 |
| Oregon | $1,678 | $140 |
| Pennsylvania | $1,872 | $156 |
| Rhode Island | $2,061 | $172 |
| South Carolina | $2,009 | $167 |
| South Dakota | $2,280 | $190 |
| Tennessee | $1,677 | $140 |
| Texas | $2,043 | $170 |
| Utah | $1,825 | $152 |
| Virginia | $1,469 | $122 |
| Vermont | $1,319 | $110 |
| Washington | $1,608 | $134 |
| Wisconsin | $1,664 | $139 |
| West Virginia | $2,005 | $167 |
| Wyoming | $1,758 | $147 |
Nationwide, Travelers and Geico deliver policies at rates below $140 monthly for comprehensive coverage. It’s important to highlight that USAA’s services are exclusive to military personnel, veterans, and their relatives.
These insurers provide the most affordable average rates for full coverage. However, it’s essential to remember that the cost of your coverage will vary based on individual needs and driver specifics, so your actual premium could differ from the average quoted rates.
The table below shows the most affordable companies for full coverage insurance.
| Company | Annual Full Coverage Rates | Monthly Full Coverage Rates |
|---|---|---|
| Nationwide | $1,548 | $129 |
| Travelers | $1,587 | $132 |
| Geico | $1,763 | $147 |
| State Farm | $1,975 | $165 |
| Progressive | $1,998 | $167 |
| Farmers | $2,387 | $199 |
| Allstate | $2,509 | $209 |
| USAA* | $1,381 | $115 |
Note: USAA is only available to military community members and their families.
There are no state minimums for full coverage car insurance on financed vehicles simply because you cannot buy minimum liability when you buy full coverage. Your lender will determine which coverages you must carry – it may require a specific deductible on your collision and comprehensive coverages.
Suppose you drop your coverage after the vehicle is financed. In that case, you will violate your financing agreement, and your lender may force you to place costly coverage on your car.
Full coverage car insurance comes with a deductible ranging from $500 to $2,500, depending on the insurance company. Your financing agreement may require that you carry a specific deductible amount. In many cases, the required deductible is $500, but it varies from lender to lender.
Gap insurance kicks in when your financed vehicle is totaled. It will help cover the “gap” between what you owe on the totaled car and what your insurance company pays out after an accident—the actual cash value of the vehicle. If you are leasing a vehicle, your lender may require gap coverage.
“Gap insurance is highly advisable for financed vehicles. It covers the gap between the car’s current market value and the amount you owe on your loan,” McAlpin says. “In the event of a total loss, this coverage ensures you are not left responsible for paying off a car that no longer exists.”
Car insurance pays out the actual cash value of the vehicle, regardless of what you owe on your loan. If you total a reasonably new car, there is a real possibility you will owe more on your car loan than your insurer will pay for the vehicle.
This is because new cars lose a lot of value once they leave the dealer lot. Gap insurance will pay the difference, so you don’t have to pay off your car loan out of pocket.
How does gap coverage work?Here’s a quick example of how gap coverage may be a good choice. If you borrow $25,000 to finance your vehicle and total it shortly afterward, your full coverage insurance will pay your vehicle’s actual cash value, which is almost always less than what you owe. In this example, it pays out a depreciated value of $22,000, which leaves $3,000 that you will have to cover. Gap insurance will cover the $3,000 difference. You can drop gap coverage once your vehicle is a few years old and the value and loan amount are more in sync.
Liability insurance is required in most states to drive legally. Liability insurance includes bodily injury and property damage and there are coverage limits for each. Liability coverage is commonly written like this: 100/300/100.
This means you have $100,000 per person in liability bodily injury coverage. This is the maximum payout per person for the medical bills of anyone you injure in an at-fault accident.
The policy provides a total of $300,000 in liability injury coverage per accident, which is the maximum paid out for all injuries in an accident you cause.
The final number is your property damage coverage. In this example, you have $100,000 in liability property damage. This coverage will pay to repair the damage you cause to other cars and property.
While liability insurance is available with lower limits, such as 50/100/50, most lenders will require you to carry higher limits.
How property damage liability insurance worksIf you have a property damage liability of $50,000 (written as the third number here: 50/100/50) and you hit and total a $70,000 Tesla, you’ll be financially liable for the difference between the $50,000 your insurance pays and the remainder of the cost of the Tesla replacement — $20,000.
Once you have paid off your vehicle, you are no longer under any obligation to carry full coverage car insurance.
However, before you call your insurer to drop collision and comprehensive coverage, remember that you will be responsible for all costs to repair or replace your vehicle if it is damaged in a collision, stolen, destroyed by a fire, hit by a deer, or flooded.
Unless you can easily afford to purchase a new vehicle if yours is destroyed, you should carry full coverage insurance to protect your vehicle and your finances.
Once your vehicle is old enough that you would replace it instead of repairing it after an accident, you should consider dropping full coverage and carrying liability only.
Your lender owns your vehicle until you have paid off your loan. To protect their investment, they want to ensure the car will be replaced or repaired if it is involved in an accident.
When you signed your financing contract, you agreed to always carry full coverage on the vehicle, so dropping your coverage will jeopardize your loan. The lender could have the vehicle repossessed, or they may force-place coverage on your vehicle and add the premium to your loan amount. Forced-place insurance is never the cheapest option, so it makes financial sense to keep your policy.
Once your loan is paid off, you can do whatever you choose with car insurance if you carry the state-required liability minimums. However, unless you can easily afford to replace or repair your vehicle, you should hang on to your full coverage. You will be on the hook for all costs to get your car back on the road after an accident or other incident.
Yes. Regardless of whether the car is new or used, your financing company will require that you carry full coverage on the vehicle. If the car is destroyed or damaged in an accident or natural disaster, your lender will want it repaired or replaced to protect their investment.
In most cases, the answer is no. Banks, manufacturer lenders, credit unions and other lending institutions require full coverage on a vehicle they are financing. They own the vehicle until you make the last payment, so they want it protected from disaster.
Insurance laws are controlled at the state level, so the minimum requirements for liability insurance vary by state. Most states do not have insurance requirements for financed vehicles, it is the lender (the company that put the money up to purchase your vehicle) that sets the insurance requirements for cars they finance.
If you have financed or leased your vehicle, your lender will require that you carry full coverage. Technically, your financing company owns the car until you have paid it off, so they want to be sure it will be repaired or replaced if it is damaged or destroyed in an accident or other incident.
While full coverage is more expensive than a liability-only policy, shopping your coverage regularly will help you find the best full coverage policy at the best price.
CarInsurance.com gathered data from Quadrant Information Institute to calculate full coverage car insurance rates by state and company. The average premiums are based on the sample profile of 40-year-old male and female drivers with a good insurance score and violation-free driving record.
The full coverage insurance rate is for the limits of $100,000 in bodily injury per person, $300,000 in bodily injury per accident and $50,000 in property damage with a $500 deductible.
We compared 510,88,003 insurance quotes from 74 company groups across 34,588 ZIP codes to determine the premiums.
The rates are for comparison purposes only and your cost may vary based on factors specific to you.
Ask the Insurance Expert
Laura is an award-winning editor with experience in content and communications covering auto insurance and personal finance. She has written for several media outlets, including the USA Today Network. She most recently worked in the public sector for the Nevada Department of Transportation.
Ask the Insurance Expert
John is the editorial director for CarInsurance.com, Insurance.com and Insure.com. Before joining QuinStreet, John was a deputy editor at The Wall Street Journal and had been an editor and reporter at a number of other media outlets where he covered insurance, personal finance, and technology.
Ask the Insurance Expert
Leslie Kasperowicz is an insurance educator and content creation professional with nearly two decades of experience first directly in the insurance industry at Farmers Insurance and then as a writer, researcher, and educator for insurance shoppers writing for sites like ExpertInsuranceReviews.com and InsuranceHotline.com and managing content, now at CarInsurance.com.
Ask the Insurance Expert
Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.
Ask our experts✓ Thank You, Your message has been received. Our team of auto insurance experts typically answers questions within five working days. Note that due to the volume of questions we receive, not all may be answered. Due to technical error, please try again later. ↻ Ask another question
Mark is a freelance journalist and analyst with over 15 years of experience covering the insurance industry. He has extensive experience creating and editing content on a variety of subjects with deep expertise in insurance and automotive writing. He has written for autos.com, carsdirect.com, DARCARS and Madtown Designs to name just a few. He is also a professional blogger and a skilled web content creator who consistently turns out engaging, error-free writing while juggling multiple projects.
Copyright © 2024 CarInsurance.com. All Rights Reserved.Disclaimer: The advertisers appearing on this website are clients from which QuinStreet receives compensation (“Sponsors”). Compensation may impact where the Sponsors appear on this website (including the order in which they appear). Our websites do not, and are not intended to, provide a comprehensive list of all companies that may provide the products and services you are seeking.
*Carinsurance.com is not affiliated with any state or government agency. Advertised example rates are returned based on the driver's self-reported data, by comparing their current reported premium against their new policy premium, and the driver meeting certain criteria. Also, safe driver and other discounts may have been applied to achieve the advertised rate, which may not be available to the average consumer. Your actual quoted rate may vary greatly and may be subject to adjustment based on verification of your self-reported data.
Advertised example rates are returned based on the driver's self-reported data and the driver meeting certain criteria. Also, safe driver and other discounts may have been applied to achieve the advertised rate, which may not be available to the average consumer. Your actual quoted rate may vary greatly and may be subject to adjustment based on verification of your self-reported data.
