Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • In almost every state, car insurance is a legal requirement for all drivers on the road
  • Not obtaining the mandated types and amounts of car insurance can lead to severe penalties
  • An auto policy can consist of several policies for different types of situations
  • In some cases, you may want to purchase GAP coverage for your used car

Making sure you have the right auto insurance coverage for your used car can sometimes be confusing. You need to obtain the legally required amounts and types, however, you do not want to spend a fortune adding coverages that you may not need.

Using a price comparison tool online can help you decrease your auto insurance rates so that you can afford to have the additional coverages you may need on your used car. Compare today by entering your zip code above.

Legal Car Insurance Requirements

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Basic car insurance is a legal requirement in nearly every state in America. Although the types of coverage and amounts can vary by state, every driver should obtain auto insurance to protect themselves and other drivers on the road.

Drivers who choose not to obtain the legally required amounts of auto insurance have the potential to create large problems for themselves and for other drivers.

Not only does their inaction drive up the cost of auto insurance for everyone, it also puts them at risk for many different consequences. Penalties for not having car insurance will also vary by state and can include any or all of the following:

  • Suspension or revocation of your driver’s license
  • Suspension or revocation of your car registration and plates
  • Community services
  • Jail time
  • Fines
  • Car impoundment

Additionally, you are putting yourself at risk for a civil lawsuit and having to pay out of pocket for any damages you cause by not obtaining the proper auto insurance coverage.

If you cause damage to another person or their property they or their auto insurance company can sue you. If they win, you will be liable to pay for their damages, which may come down to wage garnishment or seizure of your assets.

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Types of Auto Insurance

An auto insurance policy generally consists of several policies rolled into one. Each policy covers a different type of situation. Many of these coverages you will need, no matter if your car is used or new, leased, financed, or owned.

Liability

Liability is a basic coverage required in most states. Bodily injury liability is for damages you may cause to another person and will pay for their medical bills or funeral expenses.

Property damage liability will pay for damages to their vehicle or other physical property such as a fence or house. Liability does not cover your own damages.

Medical Payments/Personal Injury Protection

Also known as PIP or med pay, this type of coverage is required in no-fault states and pays for your own medical bills, lost wages, or for hired help around the house needed as a direct result of injuries from an auto accident.

Uninsured/Underinsured Motorist Coverage

Even though most states legally mandate auto insurance coverage, some drivers still choose to ignore the law.

If you are hit by a driver who does not have insurance coverage or you are a victim of a hit-and-run accident, uninsured motorist coverage will pay for your damages.

If you are in an accident with another driver who does have insurance but the expenses of your damages exhaust their policy limits, your underinsured motorist coverage can be activated. Some states legally require uninsured motorist coverage.

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Collision

Although not legally required, collision coverage is a wise idea if your car is worth a lot or you have a leased or financed vehicle. Unlike liability, collision coverage will pay for your damages resulting from an accident. You will select your policy limits and deductible.

Comprehensive

Similar to collision coverage in that you choose your own deductible and policy limits, comprehensive coverage is different only in that it is for situations outside of an accident.

For instance, you can make a claim on your comprehensive policy if you hit a deer, have a fire in your vehicle, or have your vehicle vandalized or stolen. You should also strongly consider this coverage if you lease or finance your car.

In fact, some banks or lease companies contractually require drivers to obtain both comprehensive and collision coverage.

Rental Car Coverage

If you are in an accident or have something else happen to your vehicle, you may need to find alternate transportation while it is being repaired. If you need to rely on a rental car during this time, it can get expensive.

This is where rental car coverage comes in. It generally pays a certain amount up to 30 days for a rental car if you are in this situation.

Should you buy GAP insurance for a used car?

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GAP insurance is important for many car owners to have. It pays the difference between what is still owed on your loan or lease and what your auto insurance gives you in the event that they determine it is a total loss and they will not repair it.

Having to pay this amount yourself can put you in quite a financial bind. You should consider getting GAP coverage if any of the following applies to you:

  • You put less than 20 percent down on your loan
  • You have a loan term of at least 60 months
  • You included negative equity from a previous car loan into your new loan
  • You have a car that depreciates quicker than other cars

Whether or not you have a new or used car shouldn’t influence your decision to get GAP coverage, it should be based on the above factors. In some instances, you should strongly think about adding GAP insurance to your auto insurance policy.

However, if you have a car that is leased, GAP coverage is likely included as a part of your leasing expenses or is a contractual requirement.

In order to get the coverage you legally need and the coverage you want to protect yourself and your pocketbook, try using an online price comparison tool.

These tools provide you with quotes from several different auto insurance companies and then allow you to compare and choose the policy that best fits all of your insurance and financial needs. Enter your zip code below to begin comparing.