Got an Auto Loan? Here's How It May Be Affecting Your Insurance Rates
Taking out an auto loan might require you to buy more insurance than your state's minimum requirement
Got your eye on a new (or new-to-you) car? Before you head to the bank to fill out paperwork for a loan, you might want to think about how it will affect your insurance rates.
In certain cases, your premium will go up if you have an auto loan. Why? Lenders require you to have certain kinds of coverage that often go beyond the minimum required by states.
For instance, most states generally don't require collision or comprehensive coverage, though they do require liability coverage. However, if you take out an auto loan, the lender may require you to add collision and comprehensive to your policy, which can make your premiums go up.
Now, the more frugal among you may be tempted to add coverage long enough to satisfy your lender, only to drop it after you get the loan. This is a bad idea.
When you take out an auto loan, the lender becomes an official lien-holder on your car, which basically makes them a joint owner. As a joint owner, they will require that your insurance policy lists them as the loss payee or an additional insured party. Your insurance provider will even ask if your car has a lien-holder.
When the insurance company puts the lender on the policy, the lender will also put recorded on your vehicle's title with your state's Department of Motor Vehicles (DMV). The lender will have access to that record, and if there are changes in your coverage, the DMV may tell them.
If this happens, the lender may accelerate the payoff of your loan. Even worse, since you will have violated the terms of the loan, the lender will legally be able to repossess the car and sell it to pay off the loan. And if the amount gained from the sale isn't enough to pay it off, they can then sue you personally to get you to make up the difference.
If you already have different kinds of coverage on your policy—which is a good idea in order to protect your car—then your rates may not go up if you take out an auto loan. But your premium will likely rise if you don't.
Do You Need Full Coverage Automobile Insurance or Only Liability?
Readers have been looking for ways to cut back on costs and have been looking to make those cuts in auto insurance. The main issue then becomes whether to have full coverage or only liability coverage on the vehicle. Before you drop full coverage auto insurance, you'll want to do some thinking.
Make Sure You Aren't Missing These 10 Hidden Home Insurance Credits
You probably know that measures like smoke detectors, a security system, and insuring both your home and car with the same company can lower your home insurance premium. What you may not know is that property and casualty companies offer several other and lesser-known credits that may reduce your premium even more.
Lost-Cost Sewer Backup Insurance Can Help With a Stinky Mess
If your home isn't built with devices to prevent backflows, consider contacting your insurance company to see if this type of endorsement is available for your policy. During our research, we have found that the average cost to add this coverage to a $200,000 home was less than $50 per year. That's cheap insurance considering that a simple backup can destroy your home.
Insist on Genuine Replacement Parts and Glass from Your Insurance Company
Should your vehicle be repaired using Original Equipment Manufacturer (OEM) parts or a 'quality' aftermarket part? Aftermarket parts can be a good thing, but they aren't always made to the same exacting specifications as genuine OEM parts and may not have the same long-term reliability or performance.