Taking out a car loan can be an excellent way for many people to purchase their own vehicle. But if you have a car loan, the thing that probably crossed your mind is whether having an auto loan affects car insurance. The answer to this question isn’t black or white. The truth is, having a loan can affect the insurance, but probably not the way you’d think. You don’t need to pay more money to the insurance company for the same policy when you have a car loan. Instead, an auto loan adds some extra coverage (collision and comprehensive) requirements for your insurance policy. Here are some more details about how having a car loan can affect your car insurance
1. Insurance requirements for a car purchased on loan
In all states, when the car is being registered, there is a minimum amount of coverage that needs to be paid. This refers to medical and liability, but not to collision and comprehensive coverage. So, the state doesn’t require the second two, but the finance company you hired requires. Every lender demands that the car you bought be insured, and that is the part you will not be able to skip. This is because loan lenders are partial owners of the car and want to protect themselves in case something happens to the car. If your car crashes or is damaged in any way, the lender will also lose their money, which everyone wants to avoid for a good reason.
When we talk about collision insurance, it refers to vital insurance when some kind of accident happens and the car breaks down. In these situations, it doesn’t matter who is to blame, the costs of repairing the damage will be covered. It only refers to the damage that was made while the car was in motion. It doesn’t matter if another car was involved, or you just hit someting and break the car while you were driving. The comprehensive coverage is the one that covers the damage made due to weather conditions, fire, or other external factors. For getting both of these insurances, you need to pay a deductible. You can choose the one you prefer when getting the policy.
2. Reduced payments for months when you are not using the car
If you bought a vehicle, and you don’t plan to use it all year long, you probably think you can get some reduced costs for insurance coverage. Well, this is not always the case, but it might be, depending on your lender. You can always ask them and see what are their thoughts about it. If you don’t plan to drive the vehicle, you’ll need to fill in some documents and forms which oblige you to abide by the given word that you will not use the vehicle. After you’ve done this, you’ll probably need to pay only comprehensive coverage every month, which is a much better option than paying the whole amount. After getting permission from your lender, you need to contact your insurance company and let them know about the deal you made. You’ll need to put in some more effort to achieve this agreement, but it can save you a significant month of money yearly, so it will surely pay off.
3. Your lender will be first to know if you lapse
When buying a car, you specified your lender as loss payee, and your insurance company knows this information. Let’s say you’re late with your insurance payments, or you’ve changed or completely cancelled your policy. The insurance company will instantly call your lender, and they’ll be the first the know you’ve lapsed. In these situations, lenders find themselves in a tough position since they are co-owner of the car. What might happen is that they take your car or demand you to pay off the full loan right away. Another possible option is that they increase your monthly payment, so they can cover the insurance costs. None of these situations isn’t desirable, so we recommend avoiding them at all costs. There is no way you can avoid paying your insurance without your lender getting notified about it. You will get in much trouble, so just try to skip it.
4. There is an option to save some money by choosing a good insurance company
Even if you purchased a car by getting a loan and your payments therefore increased, it doesn’t mean you still can’t save some money. Choosing a good insurance company is a way to do so. Don’t think that the same coverage also costs the same in different companies. There are plenty of insurance companies that offer low insurance rates that will be good enough for you. Also, Keller & Associates offers the option of getting your quote online. All you need is to enter some basic information and request the insurance quote for the car, home, life or business. You’ll receive the information right away, so you can understand your options and choose the one that suits you.
Always do your research first, and collect information about at least three different quotes before you make your final selection. So yes, your monthly insurance payment will increase because you need to pay some additional coverage. But if you choose well, you won’t need to spend too much money every month because you’ve got an excellent insurance rate. Also, don’t forget to ask for the discount. Many insurance companies offer discounts to their customers, and you get your payments significantly lower just by asking about getting some privileges.
If you’ve been dreaming about purchasing a car for a while, but you don’t have enough money to buy it in cash, getting a car loan can be the solution. However, an auto loan can also affect your car insurance in many different ways, so make sure you are aware of it before getting a loan and purchasing the car. We recommend always paying your monthly insurance in time and not changing the insurance policy without contacting your lender. Otherwise, you might get in trouble. Playing by the rules and fulfilling all the requirements will provide you a great experience and enable you to enjoy driving your new car without any stress.