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Q

If your loan holder put forced placed insurance on your vehicle for 8 months, then you get your own insurance can the state of PA still hold a suspension on your car?


A

Yes, it is our understanding that Pennsylvania could still suspend the registration on your car and possibly your driver's license if you did not maintain at least the state's minimum insurance on your car though your lien holder forced placed insurance on it for the prior 8 months.

Normally forced placed insurance only covers the asset, the vehicle, for the lien holder and does not include any Liability coverage and thus you would not have the state minimum Liability coverages on your vehicle as the State of PA mandates.

As you may be aware forced insurance means that the finance company takes 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 is then passed onto you, usually in the form of an added charge on your loan or lease payment. The cost of forced placed insurance is typically high and with no real benefit to you.

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.

To be clear, in most cases, this insurance coverage that they force place only protects the lender and does not protect you for your interest in the vehicle. In addition, it does not protect you against Liability for damage or injury you cause to another person or automobile, thus not fulfilling state requirements for insurance leaving you still showing a lapse with your state and thus opening yourself up to uninsured motorist penalties.

Pennsylvania law requires all Pennsylvania motor vehicle owners to maintain vehicle Liability insurance (financial responsibility) on a currently registered vehicle. Vehicle Liability insurance covers the property damage or injuries you may cause others in an accident.

A lapse in insurance coverage results in the suspension of your vehicle registration privilege for three months in PA, unless the lapse of insurance was for a period of less than 31 days. However even with this short of a lapse you as the owner or registrant must also prove to PennDOT that the vehicle was not operated during this gap in coverage. If your car was without state minimum required insurance for 8 months than likely you will be unable to prove that you did not drive it for this long period. If the PA Department of Transportation determines that you operated your vehicle without the required insurance, your driver's license will also be suspended for three months.

If you have had a lapse in auto insurance you should find your own car insurance policy to put back on the car that will cover state requirements as well as your financing company requirements so that you will not have issues with either. Once you have the proper insurance in place on the vehicle contact the lien holder with the policy information so that the forced insurance is no longer needed and can be canceled. Then the extra cost they placed on your loan amount for this insurance should be taken off.

It sounds as if you have now found an insurance policy to cover your car for the Liability limits that PA requires and the Physical Damage coverages your lien holder requires. This is good however if your forced placed insurance did not include Liability coverages, which they normally do not, than you can still be penalized for the 8 months lapse of required PA auto insurance.

Get all the auto insurance coverages that Pennsylvania and your lien holder require so that you do not end up with expensive forced insurance, high fines and suspensions. Contact PennDOT directly for more information on your specific situation and your lien holder for what exactly was covered for 8 months by the forced placed insurance policy.


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