Find out if you need full coverage on a financed car in this up-to-date guide.
Full coverage is the general term that refers to the usual car insurance coverage policy that includes a variety of coverages that protect drivers against certain perils.
Full coverage usually provides you with coverage for liability and physical damage coverage (both comprehensive and collision). Full coverage does not mean you are covered for 100% of situations. However, it is very important if you have a financed car.
If you are driving a financed car, you still need to have full coverage. This full auto insurance coverage needs to be maintained for the entire duration of the loan because it is required by lenders.
Full coverage essentially means that the lender is financially protected in case an accident happens that was the driver's fault (though you will still have to pay your deductible first).
One reason you need full coverage is that if you only have liability coverage for your financed vehicle, insurance companies actually will refuse to make a payment after you file a claim. However, full coverage means that the insurance company will pitch in to help out with your claim.
If an accident occurs and your insurance company accepts the claim because you have full coverage, the check will be sent directly to your lender, who is listed as the lienholder on your car insurance policy.
Getting and maintaining full insurance coverage on any car you finance is critical. Full coverage auto insurance must be bought at the time you initially finance a vehicle.
This is a part of the contract with the lender, and it is very important that you have full coverage. If you don’t maintain full coverage and opt to downgrade coverage to simple liability insurance, you will be violating the contract with your lender (so long as you still owe money).
If the contract with your lender is violated, it means that they are legally allowed to cancel your auto loan and take your vehicle away from you.
Your auto insurance does not technically go down just because your car has been fully paid for. The good news about paying your car loan off is that you will gain the flexibility of changing your car insurance coverage, such as downgrading it to something with a cheaper rate.
After paying off your entire car loan, you need to remember to contact your insurance company. That way, you can remove your lender as a lienholder of your car. This ensures that you can more quickly and conveniently make claims since any payments received will not get routed to your lender first.
Insurance companies can make it complex for you to make informed decisions on what insurance you should get after your car loan has been paid off.
Pairing this with the struggles of paying off a car loan in the first place, it can make driving and shopping for insurance unnecessarily hard. Make sure you reach out to Worth Insurance so we can help you get fast and competitive car insurance quotes, ensuring that you are getting your money’s value.
It is natural to be worried if you get into an accident on the road while driving a financed car. As long as you have full coverage (which lenders require), you should be adequately insured in case of an accident.
Just in case you do end up in a car crash with your financed car, you should verify in advance that you have full coverage and an active policy. If you have been missing payments, your insurance company may have automatically cancelled your policy due to the lack of payment.
If you do have insurance, it means that after you pay your deductible, your full coverage auto insurance will kick in and grant you financial assistance up to your policy limits. It will pay for damages and injuries that you may have caused to others, as well as potentially cover lawsuit expenses.
For total losses of a financed car (i.e. the cost of repairs is greater than the determined value of your vehicle), you and your lender may end up with a payment equal to the actual cash value of the car.
Getting auto insurance for a financed car doesn’t have to be hard. You can shop for auto insurance with Worth Insurance. We offer you best value coverage plans and show you quick quotes without needing to use your credit card or waste unnecessary time.