According to experts, 44% of Americans rely on auto loans to buy their cars. Are you one of them? Maybe you’re planning on doing some auto financing, but want to make an informed decision.
Besides your monthly payment and interest rate, you should also consider your car insurance policy. Learning the basics about the insurance requirements for a financed car will prepare you for when you make your purchase. Don’t know what we’re talking about?
We’ve got you covered. We’ll tell you everything you need to know about the minimum coverage for a financed car. Keep reading for your complete guide to obtaining the right policy for your next car.
Your Must-Know Guide to Insurance When Financing Your Vehicle
While you may be trying to avoid getting in more debt, taking a car loan may be your only option to buy your next car. Even though, you might’ve been putting money aside for your down payment.
It’s important to consider the cost and requirements of auto insurance before pulling the trigger. Believe it or not, your auto policy may increase when you finance your car.
What Are the Insurance Requirements for a Financed Car?
If you own a car, you may have seen a change in the cost of your auto insurance policy due to a traffic accident. When you get your auto insurance for your financed car, the type of coverage will also increase your overall cost.
While the requirements may vary on a lender and state basis, you should plan to obtain full coverage which includes comprehensive and collision. This type of insurance provides liability coverage and protection of your vehicle and yourself in an accident.
Collision coverage will protect your car from any damage no matter what caused it. In contrast, comprehensive insurance coverage will cover physical damage to your car for everything that isn’t a collision. Theft, hail damage, vandalism, and fire are some examples of events covered by your comprehensive insurance.
While you should consult several insurance agents, it’s important to be aware of any necessary insurance paperwork such as SR22 certificates. It may seem overwhelming, but you should learn more about these certificates and the minimum insurance requirements to make an informed decision.
The Bottom Line
While you may be focusing on getting your car loan approved, you should also consider the insurance requirements for a financed car. Full coverage including collision and comprehensive are typical minimum requirements.
Believe it or not, this extra coverage can add up, skyrocketing your current car insurance premium. Your state of residence, driving record and vehicle are also factors that may increase your auto insurance costs.
Keep in mind every lender has their own requirements. Before submitting your application, you should ask the bank representative about what you should expect when it comes to your auto insurance. You may also consult an insurance agent to learn more about your options and the cost of your insurance policy.
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