Yes, you have to have comprehensive and collision coverage on a financed car. Most reputable lenders require comprehensive and collision insurance on financed cars to protect their investment if the car is damaged, stolen or totaled.
Comprehensive insurance pays for repairs or replacement if a car is damaged due to something besides a crash, such as theft, vandalism, or natural disasters. Collision coverage, on the other hand, pays to repair or replace a car that is harmed in an accident. Unlike liability insurance, comprehensive and collision are not required by any state laws.
When purchased in addition to the state minimum coverage, comprehensive and collision are usually referred to as full coverage. Full coverage insurance is generally more expensive than just purchasing the state minimum coverage, but you can save by shopping around for quotes and checking out WalletHub’s guides to cheap car insurance and car insurance discounts.
Yes, you need full coverage on a financed car. Any reputable lender will require drivers with a loan or a lease to purchase comprehensive and collision insurance for their vehicle in addition to the state’s minimum requirements for car insurance. Your contract with the lender might even require you to choose a specific … read full answerdeductible to ensure that you will be able to pay it if you file a claim.
Full coverage is required on financed cars to protect the lender’s investment. This applies regardless of whether the vehicle is new or used.
When buying full coverage insurance for a car with a loan, you should notify your insurer that the car is financed, because your lender will need to be listed on the policy. As a result, your lender will be notified when your policy expires, is renewed, or is canceled. When your loan ends, you can notify your insurance company in order to have your lender removed from the policy.
If you purchase full coverage and then fail to maintain it, your lender may be able to purchase expensive force-placed insurance or even repossess your car. The good news is that having an auto loan is not considered a risk factor for insurers, so the loan itself will not increase your insurance premiums. Full coverage is more expensive than maintaining only your state’s mandatory minimum coverage, though.
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