Laura Adams is one of the nation’s leading finance, insurance, and small business authorities. As an award-winning author, spokesperson, and host of the top-rated Money Girl podcast since 2008, millions of readers, listeners, and loyal fans benefit from her practical advice. As a professional accountant and financial analyst for several companies, Laura is a trusted source on various financ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Apr 12, 2022

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Insurance Q&A: “Is insurance cheaper if you own the car?”

It certainly can be cheaper, but the answer is really up to you. Auto insurance policies offer multiple coverage types for drivers. You just need to find the right insurance company to go through.

Typically, you are required to purchase liability car insurance coverage no matter what…if you want to ‘stay legal’ that is. This means that you can go with the minimum coverage, but you may want more if you’re looking to protect your vehicle from more than just accidents.

The second, potentially optional, coverage type is physical damage coverage. Physical damage coverage can be further broken down to collision and comprehensive coverage.

[Collision vs. comprehensive coverage]

And having both liability and physical damage coverage is referred to as “full coverage.”

Whether or not you obtain physical damage coverage for your vehicle is where the rubber meets the road on this post.

Opting for no physical damage coverage will certainly save you money on your auto insurance premium.

But that doesn’t necessarily mean you will save money in the long run…more on that in a minute though.

When is it required? 

The fact is, if you financed or leased your car, you do not have the option to purchase physical damage coverage.

Your lender or lienholder will REQUIRE this coverage for the term of your loan or lease. This tends to vary from company to company, but you’ll find that most have minimum requirements set up.

This is to protect their financial interest in your vehicle. This means in the event of a property loss to the vehicle, they would receive their money first and the leftovers, if any, would go to you. Driving a leased car is driving a car that is protected from any sort of accidents, be it a collision, hitting a deer, or vandalism done by another person.

Tip: You may find it beneficial to purchase GAP coverage with a loan or lease as well. This can be tacked on to most insurance policies or added to the finance/lease agreement for a relatively small amount of money.

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When is it optional? 

So, you’ve paid your car off. Congratulations! At this point, you actually own the vehicle outright and it’s completely up to you as to whether or not you wish to insure the car against physical damage. You can go with the cheapest option available, and it’s completely up to you.

This is technically when you can get cheaper insurance for your car by dropping the extra coverage. But, is that really a good idea?

Saving money on car insurance is a great thing. Just be sure you are not risking your personal finances to save a few dollars. There are definitely affordable options out there, it just depends on what services you want to pay for.

You may want to keep the physical damage coverage if your car is still valuable or if you’re not in the position to pay for repairs. Worse yet, if you can’t afford to completely replace the vehicle if it’s totaled. You may be out thousands of dollars to buy a backup vehicle if yours isn’t able to be repaired.

With no physical damage coverage in place, that would certainly be the case if you’re involved in an accident. Depending on what happens to your car, your finances might be in better shape if you have a more extensive coverage policy.

So now what?

Remember, insurance is a good thing. It’s designed to let us to pay an exact, expected amount of money in exchange for a whole bunch of money if it’s necessary…money you may not have lying around otherwise.

Getting a better deal may be as easy as switching insurers… and you may get to keep the same coverage you enjoy right now at a lower rate. Basic coverage can be tempting at first, but it won’t protect your vehicle from all aspects of life on the road.

Or, you might even be able to add additional coverage like accident forgiveness and/or ticket forgiveness for the same price. Finding affordable rates is as easy as getting in touch with an agent or looking into a quote online. An auto policy is a great thing to invest in, and if you own your vehicle, it’ll be easier to shape the policy into being financially manageable.

Read more: How to get cheap car insurance.