Lender Insurance Requirements

If you finance your automobile, the lender will necessitate that you have vehicle insurance. The conditions of your finance will most probably require you to make available comprehensive and collision insurance. If your insurance policy lapses, the bank will force coverage (obtain a policy) and charge you for it. Forced coverage provides protection to the bank, not you, for their interest in the vehicle and nothing else.

If a bank has forced insurance coverage on your vehicle it is in your best interest to acquire standard insurance right away. The forced coverage provides no liability insurance. These policies are frequently two to three times more costly, compared to a usual policy, and the charges for these policies will be added on to your loan total.

Note: If your car is in an accident, your insurance company will reimburse for repairs or replacement only up to the car’s real cash value–the amount it would have sold for before the accident. The real cash value of the vehicle is unconnected to the amount of your car loan and may be less than what you owe on your loan. Your insurance company is compelled to return your vehicle to the state it was prior to the accident and you are accountable for what you owe on your car loan.

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