FRIDAY, JANUARY 28, 2022
Full Coverage Auto Insurance: A Good Idea even if Your Vehicle Is Paid Off
Many individuals, once they get out from under their auto loans, are eager to reduce their monthly bills and set out to do so by reducing their auto insurance coverage. Because each state has a minimum amount of required insurance, but lenders require full coverage, the payoff of an auto loan results in vehicle owners being required to carry only the minimums requirements by their state—which can result in significant premium reductions.
Full coverage is required by lenders because they want to protect themselves from the risk of a loss due to an accident, theft, fire or other insurable incident that makes the car you borrowed money to buy, worthless. When you pay off your auto loan, the lender no longer has anything at risk and is no longer concerned with your vehicle—but now you have all the risk. Why should you be any less concerned about your vehicle’s retained value than your lender is?
Full coverage protects you from a total loss of asset value in the event of a stolen or vandalized vehicle, a flood or other insurable incident. If you consider the cost of the monthly premium for full coverage versus the cost of replacing your vehicle with a new one after an insurable incident, you can see just how helpful that extra protection is.
Sometimes, it’s not just about having the extra protection so much as being made whole quickly after a loss so that you have minimal interruption in your daily life. If it would be difficult for you to replace or repair your car without the insurance benefits that full coverage offers, then you can appreciate even more just how necessary this coverage is—whether or not you still owe money on the auto loan.