Is car insurance cheaper if you own your car?

Car insurance premiums don't automatically go down when you pay off your car, but you can probably lower your premium by dropping coverage that's no longer required. Banks and financing companies who loan you money for your car are called lienholders. Lienholders generally require you to have comprehensive car insurance coverage and collision car insurance coverage while you're paying off a loan. After the loan is paid back, and the lienholder is removed, you're no longer required to carry these coverages.

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

When deciding if you should decrease your car insurance coverage, determine 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 and has lost much of its 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.

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 adding classic car insurance coverage.

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.