Does Financing A Car Affect Auto Insurance?
If you still finance your car, you may wonder if this affects your rates. This is a common concern amongst drivers. Read the following blog post to find out the answer. Also, get auto quotes online, for free, from our website.
The short answer is “yes”, but the degree and implications vary by insurance company, financing level and other related circumstances. By financing we mean getting a loan from a bank or other traditional financial institution.
For example, there is a whole lot more paperwork to fill in when buying car insurance for a car you still finance. Lenders will want to be listed as a loss payee and possibly as additional insured on the car they have financed the purchase of. But adding them does not cost you more money.
Financing a car determines the mandatory coverage options. lenders require both comprehensive coverage and collision coverage on top of the state minimum requirements. Being required to carry comprehensive and collision with your lender will surely raise your car insurance rates when compared with a liability-only policy.
Also, you will have some restriction from dropping coverage, even when the car is not used. You might think that if your car is not in use year-round, you’re off the hook for full coverage, but that is not typically the case. Most financed cars are required to carry full coverage all year round until the loan is paid off per the lender. Keep in mind that insurance carriers update loss payees through the mail of any changes to the policy regarding the vehicle they are listed on. It includes late payments, coverage changes, and policy cancellation. So, the lender, which is listed as loss payee, will know exactly what it happens to your car insurance coverage.
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