Can You Get Liability Insurance on a Financed Car
The question many car buyers will ask themselves when they want to save money by insuring a car they are financing is can you get liability insurance on a financed car. When you finance an automobile, the lender is technically the owner of a car until the loan is completely paid. Due to this fact, lenders tend to provide some insurance requirements that are beyond liability cover. These are essential requirements that you should understand to guarantee your financial protection and to ensure that you remain within the terms and conditions of your financing agreement.
Can You Get Liability Insurance on a Financed Car and What Does It Mean?
One question closely related to the nature of the protection that liability insurance provides is can you get liability insurance on a financed car. Liability coverage does not include any damage or injury you can cause to other people in an accident. It is not inclusive of insurance that covers your damaged or stolen financed car. Liability coverage is the minimum insurance required by law in most states, but it may not meet the requirements of your lender since it does not secure their financial interest in the car.
You can get to know more about the basics of liability insurance through Insurance Information Institute
Can You Get Liability Insurance on a Financed Car When Lenders Require More?
Getting liability insurance on a financed car is tricky due to the fact that lenders usually require a more detailed coverage. Majority of lenders have a requirement that you have full coverage insurance which includes:
All inclusive: Covers theft, vandalism, fire, natural disasters or hitting an animal.
Collision coverage: Covers the damages on your car caused by accidents irrespective of the faults.
The reason why these requirements exist is that lenders would like to ensure that the vehicle, which they are lending, is secured financially until you pay off a loan. The mere existence of a liability coverage will most likely not suffice to fulfill such requirements.
To find out more information on the requirements of financing, you can visit Consumer Financial Protection Bureau
Can You Get Liability Insurance on a Financed Car If You’re Trying to Save Money?
Getting liability insurance on a financed car is appealing to drivers who are looking to pay cheaper premiums. The liability-only coverage is relatively cheaper than the full coverage, and this is why some drivers are thinking of switching after purchasing a financed car. But even though you might end up paying less every month in premiums you can risk breaching your loan agreement.
Failure to retain the necessary coverage subjects you to the risk of being forced-placed with insurance, which is typically pricier than normal coverage. This would then be more than you would have paid to be fully covered in the first place.
Can You Get Liability Insurance on a Financed Car After the Loan Is Paid Off?
How can you insure a financed car against liability is an easier question to answer when you have paid off your loan. When the car has been fully owned you can always change your insurance to cover liability should you want. Liability-only coverage is used by many individuals who drive old cars or vehicles that are not well valued, as a way of saving money.
At this point, you are expected to review the value of your car and your financial status. Liability coverage may be the wiser money option, should your old car be not worth fixing following a big crash. To find out how to know when to get rid of full coverage or not, check out the Nerdwallet guide to auto insurance.
Can You Get Liability Insurance on a Financed Car While Meeting State Laws?
Whether you can get liability insurance on a financed car also depends on your state laws. All states impose some form of minimum liability cover on drivers, but such coverage might not be sufficient to cover your financial damages. E.g., when your state mandates that the bodily injury coverage is only 25,000 per individual, but you are involved in an accident resulting in 75,000 in medical expenses, then on top of 25,000 you owe yourself the 50,000 above that.
Although liability coverage is legally adequate, it is not necessarily sufficient to protect your finances or the interests of your lender in the car. One should strike a balance between cost and coverage.
Can You Get Liability Insurance on a Financed Car and Still Protect Yourself?
The question to ask is not can you get liability insurance on a financed car. Rather, ask yourself whether the liability-only coverage is sufficient to financially secure you. Natural disasters, theft or accidents may mean you end up paying thousands to repair or even continue to make loan payments on a car you cannot drive. That is why full coverage is sometimes the wiser choice until you have paid off your loan in full.
When affordability is an issue, you may want to consider low-cost options, like purchasing home and auto insurance together, having a safe driving history, or enrolling in defensive driving school. Companies like Geico
and Progressive provide various discounts that may make full coverage less expensive.
Final Thoughts on Can You Get Liability Insurance on a Financed Car
The question of whether or not you can get liability on a financed car is a legitimate question, but the fact remains that liability-only coverage is not accepted by most lenders. Liability is the minimum legal requirement but it does not secure the investment in the car made by the lender. You probably will still require full coverage until you settle your loan. Liability coverage is the kind of car coverage you can switch to after paying off your car so long as it makes economic sense.
Your loan agreement, insurance needs in your state and your own financial situation should always be considered before making a choice. The temporary benefits of the liability-only cover might not be worth the risk in the long term of not having sufficient coverage.