{"id":10123,"date":"2024-02-23T14:13:36","date_gmt":"2024-02-23T14:13:36","guid":{"rendered":"https:\/\/www.freeway.com\/knowledge-center\/?p=10123"},"modified":"2024-02-23T19:20:54","modified_gmt":"2024-02-23T19:20:54","slug":"insurance-requirements-when-you-finance-your-car","status":"publish","type":"post","link":"https:\/\/www.freeway.com\/knowledge-center\/auto\/insurance-requirements-when-you-finance-your-car\/","title":{"rendered":"Insurance Requirements When You Finance Your Car\u00a0"},"content":{"rendered":"\n
Thinking about financing a new or used vehicle? One thing to consider is how much your car insurance<\/a> will cost. In most cases, your lender will require what is known as full coverage. This 3-part coverage consists of liability insurance, plus collision and comprehensive coverage. So, before you sign on the dotted line, let\u2019s explore what type of insurance policy you\u2019ll need to buy with a financed automobile. <\/p>\n\n\n\n When you borrow money to purchase your new wheels, the company loaning that money has a vested interest in the car. This car, in effect, belongs to them until you pay off your loan. It\u2019s the collateral the company has to make sure you continue to pay them. A wrecked, totaled or stolen vehicle is worthless, so if you stop making payments, the lender has nothing to repossess and sell to try and make up the loss. <\/p>\n\n\n\n Most vehicle financers require, at a minimum, collision coverage and comprehensive. The state you drive in requires liability to help offset the costs associated with a wreck you cause, such as injuries and property damage. How much car insurance you need<\/a> depends on where you live and your lender. <\/p>\n\n\n\n Every state sets a different amount of state-required minimum liability insurance<\/a>. These totals are set by law in the state legislature. Some states have ridiculously low requirements, such as California car insurance<\/a>, which only requires $5,000 in property damage liability and $15,000 for bodily injury\/death per person – a fairly low bar with today\u2019s medical, vehicle, and repair costs. Other states have much higher liability requirements, such as Alaska\u2019s auto coverage<\/a>, which requires its residents to carry $50,000 bodily injury per person and $25,000 property damage. <\/p>\n\n\n\n You\u2019ll have to decide for yourself if you are comfortable with the minimum requirements. Many drivers increase the limits up to $100,000 for bodily injury\/death per person and $100,000 for property damage. This is because any amount due over your policy limit will come out of your pocket. <\/p>\n\n\n\n Liability consists of bodily injury and property damage. In most states, it is designed to help pay for injuries and damages suffered by others if you cause an accident. Bodily injury<\/a> kicks in to help pay for medical expenses, pain and suffering, loss of income, funeral expenses and legal defense fees if you are sued. <\/p>\n\n\n\n Property damage<\/a> is intended to help pay for any damage you cause to another person\u2019s property if you cause an accident. This could be someone\u2019s vehicle, house or fence. <\/p>\n\n\n\n Your state sets a required level of minimum coverage. Most experts recommend a higher level than that to be fully protected financially. For example, if you hydroplane into someone\u2019s new Lexus, the repairs will probably cost more than the state-required minimum. Anything over your policy limit comes out of your pocket (or you can be sued for the rest, which may mean your assets can be seized). And there will be no money coming from your insurer to pay for your own damages and injuries. <\/p>\n\n\n\n States do not require collision or comprehensive, but these coverages (and others) are recommended. With these two add-ons, it doesn\u2019t matter if you are at fault. You\u2019ll still have the necessary funds to repair your own vehicle \u2013 even if something happens when you are not driving, like your vehicle is stolen. <\/p>\n\n\n\n Your friendly neighborhood agent is happy to help you with choosing the right auto insurance<\/a> for your situation. <\/p>\n\n\n\n Collision and comprehensive are the two parts of full coverage that your lender requires you to have if you financed your vehicle. Both of these require a deductible and both kick in to repair or replace your ride in the event of a loss, regardless of fault. <\/p>\n\n\n\n As the names implies, collision<\/a> covers repairs or replacement after your car collides with something else. Comprehensive<\/a> kicks in for events that happen mostly when you are not even behind the wheel, like a storm that knocks a tree branch on your car. <\/p>\n\n\n\nWhy Car Insurance is Important for Financed Cars <\/h2>\n\n\n\n
Minimum Requirements for Financed Vehicles <\/h2>\n\n\n\n
State-by-State Requirements <\/h3>\n\n\n\n
Liability Coverage <\/h3>\n\n\n\n
Recommended Coverages <\/h3>\n\n\n\n
Collision and Comprehensive <\/h2>\n\n\n\n
Insurance Deductibles for Financed Cars <\/h2>\n\n\n\n