What happens once my car is paid off?

Once the loan or lease on your car is paid off, reach out to your insurance company to have the lienholder removed. Doing so may help simplify the payout process for any future claims you file. If you do file a claim on your paid-off car prior to removing the lienholder from your insurance policy, you can ask your insurer to confirm with the lienholder that your loan is paid off; this can likewise simplify the payout process. And while there's technically no insurance discount for paying off your vehicle, you can use this time to look into other car insurance discounts.

Reassessing your coverage

Most banks and financing companies require you to have comprehensive and collision coverage while you're paying off a loan. The good news is, once the loan is paid off, you're free to explore other options and most likely won't need as much coverage as you had when you were locked into a loan or lease. Remember, you'll still need to carry some coverage since car insurance requirements in every state except New Hampshire necessitate some form of it. (And even in New Hampshire, you need to prove financial responsibility when liable.)

Should I lower my car insurance coverage once my car is paid off?

When deciding if you should decrease your car insurance, get to know your car's value and the state of your personal finances. The following situations could mean it's more cost-effective to reduce or drop comprehensive and collision coverage:

  • Your car's value no longer warrants it: If your vehicle is older or has high mileage, it no longer holds the value it once did. Here's a good rule of thumb: If your annual insurance premium is more than 10% of your car's cash value, it may make sense to reduce your coverage.
  • You've built up a substantial savings account: If you feel confident you have enough cash to repair or replace your vehicle in the event something happens to it, dropping optional coverage can reduce your premium — as long as you're comfortable with the risk.

Does your annual insurance premium cost more than 10% of your car's cash value?

When does it make sense to keep extra coverage on my car?

If you need your savings for other emergencies:

Do you have some funds saved for an emergency, but you aren't sure what you'd do if more than one unexpected cost came up? Keeping extra coverage can help ensure your emergency fund isn't drained by costs that comprehensive or collision would cover.

If you have a classic car or rare model:

If your vehicle is a rare or classic model, you may want to carry additional coverage. Suppose your vintage car is damaged in an accident and requires hard-to-get original parts and specialized service from a classic car expert. To help ensure you don't lose your prized vehicle to costly repairs, consider getting classic car insurance.

How to get car insurance from Progressive


Answer some easy questions and choose coverages.

Call us

A licensed representative will answer any questions you have.

Ask an agent

Need local advice? We'll connect you with a licensed independent agent near you.

Looking for more information about auto insurance? Our car insurance resource center has you covered.