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Financial Lenders Now Buying Lender Based Car Insurance Policies For Drivers

When drivers purchase new vehicles they typically will take out an auto loan for the financing of it. Cars that are financed must have comprehensive and collision coverage on them at all times which can be expensive. Millions of people are currently unemployed and some of them have allowed their car insurance coverage to lapse because they cannot afford to pay the premiums any longer.Now in some states lender placed insurance coverage is being forced on drivers. This is a situation in which the financial lender of a vehicle will purchase insurance coverage and then mandate that the driver pay the premiums each month. 

The state of Maryland has sent out a consumer advisory about this issue so that drivers can be aware of the problems that this type of insurance coverage might cause them. The insurance premiums are much higher than typical insurance that drivers can purchase on the open market. The insurance company will then send out a bill to the driver and they will have to pay for their insurance premiums or the car can be repossessed. This allows lenders to make sure that the vehicles that they are financing have up to date insurance coverage on them at all times. In the eyes of financial lenders, they are going to look out for themselves and their financial investments so purchasing the policies themselves really does not cost them as much as having a stolen or totaled car that they cannot get any money for. 

They will recoup the money that they have paid out for the policies through passing on the costs back to the driver who has financed the car. It is important for drivers to understand that having the car insurance bought through the financial lender can be a huge disadvantage. It is not only more expensive but it will also look out for their needs and not yours. The insurance policies often only cover the amount of money that the borrower has to pay back which could hurt drivers and make them have an insufficient amount of coverage if they are the at fault driver in an accident. Drivers who want to avoid having a lender based insurance policy taken out for them on their vehicle should try to stay insured at all times. Once a policy has been cancelled for non-payment, the insurance company will be notified. This means that getting a replacement policy is vital to having the type of coverage that will protect you and your lender financially. One idea is to ask a friend or family member to front you the money for the insurance premium payments so that you can have insurance coverage as soon as possible.

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