When buying a used car insurance it’s important to know that you can actually save money on your premiums. Auto insurance is required by the law to drive, however with a used car you can save tremendously on your car insurance. There are usually three main types of auto insurance coverage:
- Liability (damage to other people and property)
- Collision (damage to your car by other cars )
- Comprehensive (damage to your car other than by other cars; hail, hitting an animal, fire, vandalism, theft)
Now let’s break these apart.
A used car can do as much damage to other people and buildings/property as a brand new car, so the cost for your liability coverage will stay pretty much the same. This stuff is cheap anyway, just raising your deductible from $250 to $500 on collision coverage can buy you $200,000 extra liability coverage, which most people don’t ever have enough of. So doesn’t matter if you have a used car or not – the price for liability coverage will stay pretty much the same.
However, that’s totally different for collision and comprehensive coverages. You’ll definitely have to pay less for collision coverage because it costs much less to repair or replace a used car than a brand new vehicle. You can also take into consideration dropping collision coverage (and comprehensive) altogether for a car that doesn’t cost much (say, under $5,000) and this will in turn save you money by not paying for collision coverage which is the most expensive out of all coverages. On average a person will file a claim once in 5 years, so multiply your annual collision premium by 5, consider the salvage value of the vehicle and depreciation – then compare it to the cost of your used vehicle. If the cost of the vehicle is considerably greater, keep the collision/comprehensive coverage, if it’s less or the same – drop the coverage. Same goes for the comprehensive coverage. If you have a used car you will pay less for it because of the same reasons stated above. It simply costs less money to repair/replace a used vehicle than a new one.
When buying insurance for a used car, don’t forget to get uninsured/underinsured motorists coverage which will pay you in case of a hit-and-run accident, when another driver doens’t have insurance or when he doesn’t have enough in liability coverage to cover the amount. In some states it’s mandatory, like in New Jersey, in others it’s not. To be on the safe side it’s better to get it as it does not cost much but saves you from potential financial or health ruin.
As used car insurance is no different from regular car insurance, and we have already written an article on how to save the most on your car auto insurance while getting the best possible coverage, so read Comparing Cheap Car Insurance for more tips and tricks on how to get the best possible deal on your used car insurance.
If it’s your first car, refer to First Time Car Insurance, which talks about nuts and bolts of auto insurance and how to avoid the common pitfalls.