Title In Hand: Does Owning Your Car Outright Lower Insurance Rates?

Paying off your car is a major financial milestone—it means no more monthly car payments and full ownership of your vehicle. But does this help you save money on car insurance? Many drivers assume that owning their car outright automatically lowers their premiums, but the reality is a bit more complex.
​
While paying off your car can impact your insurance costs, it’s not the sole factor in determining your rates. In this guide, we’ll break down how owning your car outright affects insurance premiums, what coverage you can adjust, and how to maximize savings.

1. Does Owning Your Car Outright Lower Insurance Rates?
The short answer is: Not necessarily, but it gives you more control over your coverage.

Auto insurance companies don’t base your premium on whether or not you have a car loan. Instead, they calculate rates based on factors like:
✔ Your driving history (accidents, violations, claims)
✔ Your age and location
✔ Your car’s make, model, and age
✔ How much you drive
✔ The coverage options you choose

However, owning your car outright allows you to make changes to your policy that could lower your costs.

2. How Paying Off Your Car Affects Your Insurance Coverage
When you finance or lease a car, lenders require you to carry full coverage insurance, including:
✔ Collision Coverage – Pays for repairs if your car is damaged in an accident.
✔ Comprehensive Coverage – Covers non-collision damages like theft, vandalism, and weather-related incidents.

Once your loan is paid off, you're no longer required to carry these coverages, giving you the option to adjust your policy to save money.

Should You Drop Full Coverage?
Before making changes, consider the following:
✅ If your car is newer or valuable, keeping full coverage may still be worth it.
✅ If your car is older or has a low resale value, you might save money by dropping collision and comprehensive coverage.
✅ If you rely on your car for daily transportation, having coverage for major repairs could be a smart investment.

A good rule of thumb: If the cost of full coverage is more than 10% of your car’s value annually, consider adjusting your policy.

3. What Insurance Coverages Can You Adjust After Paying Off Your Car?
A. Adjust Collision and Comprehensive Coverage
✔ If your car is worth less than $3,000 to $5,000, you may consider dropping these coverages.
✔ If you still want protection but at a lower cost, raise your deductible instead of removing coverage completely.

B. Maintain Liability Insurance (Required by Law)
✔ Regardless of ownership, you must have liability insurance to cover damages to others if you’re at fault in an accident.
✔ Most states require a minimum level of liability coverage—check your state’s requirements.

C. Consider Uninsured/Underinsured Motorist Coverage
✔ Protects you if you’re hit by a driver with little or no insurance.
✔ Worth keeping, especially if you drive in areas with high rates of uninsured drivers.

D. Keep or Adjust Personal Injury Protection (PIP) or Medical Payments (MedPay)
✔ Covers medical expenses for you and your passengers after an accident.
✔ If you have good health insurance, you might reduce or drop this coverage.

4. Other Ways to Lower Insurance Costs After Paying Off Your Car
Even if ownership alone doesn’t lower your insurance, there are ways to cut costs and maximize savings:

✅ A. Raise Your Deductible
✔ Increasing your deductible from $500 to $1,000 can lower your premium.
✔ Only do this if you have savings set aside to cover the higher deductible in case of an accident.

✅ B. Reduce Unnecessary Coverage
✔ If your car’s value is low, consider removing collision and comprehensive coverage.
✔ Opt out of rental car reimbursement if you have another vehicle available.

✅ C. Maintain a Clean Driving Record
✔ Avoid accidents and tickets—safe drivers get lower rates over time.
✔ Consider taking a defensive driving course for additional savings.

✅ D. Drive Less (If Possible)
✔ If you’ve reduced your daily mileage, notify your insurer—lower mileage can mean lower rates.
✔ Some insurers offer usage-based insurance programs that reward safe, low-mileage drivers.

Final Thoughts: Should You Change Your Insurance After Paying Off Your Car?
Paying off your car doesn’t directly lower your insurance rates, but it does give you the freedom to adjust your coverage and potentially save money.

Key Takeaways:
✔ Insurance premiums are based on driving history, location, and coverage—not loan status.
✔ Once you own your car outright, you can adjust or drop certain coverages to save money.
✔ Liability coverage is always required—make sure you meet state minimums.
✔ Consider keeping comprehensive and collision coverage if your car is still valuable.

At Elite Insurance Services, we put our clients first by offering them policies that they can afford. Having insurance is a necessity nowadays, and we're here to help you. Learn more about our products and services by calling our agency at (719) 302-1110. You can also request a free quote by CLICKING HERE. 

Disclaimer: The information presented in this blog is intended for informational purposes only and should not be considered as professional advice. It is crucial to consult with a qualified insurance agent or professional for personalized advice tailored to your specific circumstances. They can provide expert guidance and help you make informed decisions regarding your insurance needs.