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Do I Need Full Coverage Insurance on My Vehicle?

Updated December 2, 2019 . AmFam Team

There are a lot of good reasons that make full coverage on your car a good idea. If you find yourself wondering, “Why do I need full coverage on a financed car?” ask your local auto dealer’s financing team — they’ll be very direct about their car loan insurance requirements. You need full coverage when a bank lends you money on a car because your lender needs to know that you’ll be covered if the car is totaled in an accident.

And because new cars depreciate about 20 percent in their first year, you’ll probably want to pick up loan or lease gap coverage insurance, too. It’s important coverage that helps pay for the difference between the amount you owe on the car and its actual cash value.

Full coverage is comprised of a suite of insurance policies that together provide full coverage. These policies include collision, comprehensive and liability coverage. And each type of insurance plays a key role in protecting your new vehicle and your savings if you’re in an accident.

Car Insurance Coverage

Learn about the types of car insurance you'll need and request a quote today.

When should you drop full coverage on a car?

Full coverage offers lenders and vehicle owners broad spectrum car protection. But as a car ages, it’s going to depreciate at a rate of about 10 percent annually. And if your car isn’t worth much, you may not need full coverage anymore because the limits that pay for expensive repairs to your car won’t be reachable. Given the vehicle’s limited resale value, it may not make sense to carry a policy like this.

If that leaves you pondering questions like, “If my car is paid off what kind of insurance do I need?” — don’t worry, it’s a common concern. It’s a good idea to consider the value of your car and match it with coverage that protects it best. If you paid for a new car in cash, and own it outright, full coverage still makes good sense because you’ve got a lot to protect if something should happen.

How much is full coverage insurance?

Full coverage policies are priced like most other insurance products. Your premium will be based off of many factors, like:

  • The zip code where the car is registered
  • Your insurance rating
  • Your credit worthiness
  • The driving record(s) of those named on the policy
  • The value of your car
  • Applicable discounts if you’ve bundled your insurance needs
  • The deductible you select
  • The coverage limits you select

Wondering how home and auto insurance works?

Well it all starts with your premium.

When you pay your premium it goes into a bucket of money that holds the premium of everyone who is insured by the insurance company.

So when a customer needs to file a claim, your insurance company will use the funds in the bucket to help cover costs for things like auto and home repairs.

And when there are lots of claims, you might see an increase in your premium because the insurance company needs to cover all of the claims being filed.

Looking for ways to save on your insurance? Consider bundling your auto and home insurance together, paying your bill in full and taking advantage of the available discounts at American Family Insurance.

We do our best to keep insurance costs low while still providing dependable coverage and excellent service.

Connect with an agent to get the protection and support you need.

Work with Your Agent to Fine-tune Your Coverage

As your car gets older, you’ll find maintenance costs can start to escalate and that worn out parts need replacement. The time may come where you may consider trading that old car in for a newer, more dependable model. While you’re reviewing your options, reach out to your American Family Insurance agent and request a quote. You’ll find they’re able to help you leverage discounts and help you with ways to save on your premium that can help make great coverage really affordable.

The information on this webpage represents only a brief description of coverages, is not part of your policy, and is not a promise or guarantee of coverage. If there is any conflict between this information and your policy, the provisions of the policy will prevail. Insurance policy terms and conditions may apply. Coverage features and limits vary by state and may be subject to change. Some products are not available in every state. Discount availability and eligibility vary by state and policy terms. (Discounts apply to auto and property policies.) Please check with your agent and read the policy for exact details on coverages and exclusions.

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