Does Auto Insurance Go Down after a Car Is Paid Off?
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Will My Insurance Premiums Go Down when I Pay Off My Car?

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Does Auto Insurance Go Down After a Car Is Paid Off in San Diego, CA


Many people think the cost of car insurance Chula Vista goes down as soon as they pay off their car loans. This is true most of the time, and in some cases, auto insurance rates can drop dramatically after a car is paid off. Below, we offer a look at why insurance premiums often go down when an automobile loan is paid off.

Lienholder Insurance Requirements

Whenever you finance a car purchase, the finance company holds a lien against your automobile. In essence, until you pay off your loan, you don’t own your car—the finance company does, and to protect their financial interest, the company will probably require you to purchase a minimum level of comprehensive and collision insurance for your car. In fact, it’s quite difficult to even get financing to buy a car unless you have this type of coverage. Because of these requirements, your premiums could be higher. After you pay off your loan, the finance company no longer has any interest in the car, so you can lower your premiums by dropping comprehensive and collision coverage and keeping only liability coverage if you want to do so.


With time, your car’s value will depreciate. The greatest rate of depreciation usually happens in the first few years, and by the time your auto loan is paid off, your car may be worth less than half what you paid for it. Insurance rates for older cars are typically lower because they cost insurance companies less to pay off if they’re damaged or stolen.

After you’ve paid off your car loan, reach out to your insurance company to find out if depreciation has made your car cheaper to insure than when you bought it. Insurance companies don’t automatically adjust insurance premiums as car values depreciate, so check in with them regularly to make sure you’re not paying for more insurance coverage than the value of your car.

Lowering Limits

You can often lower your insurance premiums without completely dropping your comprehensive and collision insurance coverage. You can also cut down on your costs by lowering the coverage limits on your auto insurance policy. Another option is increasing your deductible, which will reduce your monthly premiums, but it will also reduce the amount the insurance company will pay if you’re in an accident or experience damage to your car. Some insurance companies will offer you a discount if you have a good driving record, and buying multiple policies from the same provider could also reduce your insurance costs. 

When you need advice about which type of auto coverage you need, trust Altra Insurance Services to be your guide. We’ll help you choose the insurance coverage that’s right for you so you can enjoy peace of mind. Whether they need auto insurance, motorcycle insurance, or high-quality home insurance, San Diego residents know they can trust us to provide reliable, affordable coverage. Give us a call at (800) 719-9972 or request an online quote now.

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