It will depend upon the terms and wording of your financial agreement as to what will happen if you do not maintain the required insurance on your financed vehicle. The lien holder may be able to repossess the car or may be allowed (and choose to) place “forced insurance” on the vehicle.

Forced insurance means that the finance company would take out insurance on the car, to protect their asset which you are failing to do by not keeping the mandated insurance on it. The cost of this insurance would be passed onto you, usually in the form of an added charge on your loan or lease payment.

Loan or lease documents usually state that if you do not obtain or keep the appropriate insurance coverage on the vehicle that they, the lien holder, will secure such coverages and charge you for it. When the financial place gets insurance for you, these charges are subject to interest and the premiums will be higher than if you purchased the insurance yourself. This forced insurance typically provides protection to the bank or other financial institute, not you, for their interest in the car.

If you are in this situation to find out what could happen to your car if you let insurance lapse, read through your financial paperwork or contact the financial institute that is the lien holder on the car. You should be able to find out if the car will be taken back by the bank or if they will get insurance on it. If they have placed insurance on the car, you may want to find out if you get your own insurance back on the vehicle if the forced insurance will continue or if that insurance (and the extra charge for it) will be dropped.

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