Auto Insurance Coverage for Financed Vehicles

You may ask the question: What auto insurance coverage is required for financed vehicles?

insurance coverage for financed vehiclesIf you’re financing a vehicle, it is likely that your finance company will require physical damage coverage for your vehicle in order to protect their collateral in the loan, the vehicle itself.

What a finance company wants to avoid, is a situation where the vehicle being financed becomes damaged or stolen and is not repaired or replaced. This can lead to consumers failing to make their payments or finance companies not having anything to repossess in case of failed payments.

Physical damage coverage is broken down into two parts;
  1. Comprehensive Coverage - covers damages or pays replacement of your vehicle in case of theft, vandalism, fire and related damages other than those caused by a collision.
  2. Collision Coverage - is just that, coverage for damages as a result of a collision. This coverage will repair your vehicle’s damages or will pay the value of the vehicle if it is un-repairable.
Comprehensive and Collision coverage comes with a deductible which is the amount of money an insured is required to pay in order to begin repairs. A deductible can range from $ 0 – 1,000 and sometimes even higher, which is not recommended.

The higher your deductible is, the lower your insurance premiums will be; however, you must keep in mind that you will be required to pay the deductible in case of a claim, so make sure you can afford it.

Comprehensive and Collision coverage is based on your vehicle’s replacement cost and other factors such as how often it’s stolen, and even the driver’s information such as age, gender, driving history and more.

It is important to maintain physical damage on your vehicle if you’re financing it, not only because it provides valuable coverage, but because if you do not provide your finance company with proof of coverage, they may add their own.

When a finance company force places a physical damage policy on your vehicle, the premiums can be sky-high; additionally, keep in mind that physical damage policies do not include liability, or any other coverage that may be mandatory by State laws.

If your finance company already forced placed coverage, you may still purchase your own policy and have them remove their policy by providing them with proof.

The best way to find competitive rates on Comprehensive and Collision coverage is to complete a rate comparison. OnlineAutoInsurance.com allows you to compare auto insurance quotes online from multiple companies with one simple process.
 

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