Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Apr 14, 2022

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In a nutshell...

  • A lien holder’s requirements are no longer applicable once you pay off a car loan
  • You can choose to drop down to the state minimum level of insurance
  • Car insurance often drops as the value of the car drops

You should always be looking for ways to lower car insurance. When you have a car loan and it is finally paid off, you will find that your insurance premiums can be lowered.

There are various changes that you can make to your policy. You should also make sure that you still have sufficient protection against anything that could happen to you and your car, on and off the road.

Compare car insurance options and quotes by entering your zip code into our free rate tool above.

Eliminate Lien Holder Requirements


When you have a car loan, there is a lien holder that holds the car’s title until you have satisfied the loan in full. The lien holder will likely impose requirements on your car insurance.

Such requirements often include collision and comprehensive coverage.

Once you pay off the loan, the title is transferred to your name. You no longer have a lien holder and therefore there are no longer requirements being imposed by them.

You might wish to remove collision and comprehensive coverage from your policy to drop the premiums to a more affordable amount.

If you wish to maintain the protection, you can lower the levels of coverage. Quotes online will allow you to adjust the coverage levels to see how it will impact monthly premiums.

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Explore the Car’s Depreciation

When you buy a new car, it has a high value. As you continue to drive your car year after year, it starts to depreciate.

The depreciation provides good news and bad news:

  • The bad news is that your car won’t be worth the same as what you paid for it once you are done making the loan payments.
  • The good news is that the lower value will make your car insurance more affordable.

Insurance is calculated based on many factors. The car you drive is one of the main factors, and insurance will look at what the value is. If you are involved in an accident, you are going to file a claim for repairs or perhaps a total replacement if the car is totaled.

Meet the State Minimums of Insurance


You will have to at least meet the state minimums for car insurance. If you are stopped for a traffic violation or are in an accident, you will be asked to provide proof of insurance.

Failure to provide proof of insurance can result in various penalties:

  • Fines
  • Imprisonment
  • Points on a license
  • License revocation

The penalties will vary by state as well as how many offenses there have been on your record.

Most states require you to have liability coverage for both property damage and bodily injury. These will cover you in the event you are involved in an accident with another vehicle.

Some states might also require you to have uninsured motorist coverage, which provides protection against hit-and-runs as well as if the other party is at fault and does not have insurance.

PIP or personal injury protection might also be required, and this is designed to provide coverage for medical bills and lost wages for you and your passengers if you are at fault for an accident.

Protect Your Investment

Lowering your insurance is a great way to save money. You should also be sure you are protecting your investment at all times.

Once you pay off a car loan, can you afford to make the repairs or replace the car if you’re in an accident? If the answer is no, you still want to have plenty of coverage.

Comprehensive and collision coverage should be maintained at least to some degree. It will cover you against non-collision related incidents as well as accidents where you are at fault.

Paying off your car loan will help to lower your car insurance.

You have to determine how you want to adjust your coverage levels so you still have financial protection in place.

Every insurance company calculates the cost of insurance differently, so it’s important to spend some time getting quotes and comparing what you get with what you will pay.

Enter your zip code below to compare today.