What Drivers Should Know About Lender-Mandated Auto Insurance Policies

Financing a vehicle comes with more than just monthly payments. Lenders often require specific types of auto insurance to protect their investment, and understanding these requirements is key to avoiding unexpected costs. If you’re financing a car, here’s what you need to know about lender-mandated auto insurance policies.

Why Do Lenders Require Certain Coverage?

When you finance a car, the lender technically owns the vehicle until the loan is paid off. To protect their investment, lenders require comprehensive and collision coverage. These types of insurance cover damage to the car from accidents, theft, vandalism, and other incidents. It’s important to review your loan agreement to confirm the exact coverage requirements.

What Happens If You Don’t Meet the Requirements?

If your insurance policy doesn’t meet the lender’s standards, they may purchase a policy on your behalf and add the cost to your loan payments. This is known as force-placed insurance, and it’s often more expensive than finding coverage on your own. To avoid this, make sure your policy includes the required coverage from the start. La Porte Insurance Agency, located in La Porte, IN, can help you find a policy that meets lender requirements while keeping your costs manageable.

Should You Consider Additional Coverage?

While lenders typically require comprehensive and collision coverage, gap insurance is another option worth considering. Gap insurance protects you if your car is totaled and the insurance payout doesn’t cover the remaining loan balance. For financed vehicles, this extra coverage can provide peace of mind and financial security.

Navigating lender-mandated auto insurance policies doesn’t have to be complicated. By working with a trusted agency like La Porte Insurance Agency, located in La Porte, IN, you can ensure your policy meets all requirements while providing the protection you need. Contact us today to learn more about your options.