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It’s your responsibility to check your coverages


Question: Can an insurance company put minimum coverage on a financed vehicle even if I’m required to carry full coverage?  I thought if I indicated that I was paying payments that would be enough for the insurer to put the right coverages on it.

Answer: The coverage placed on your car insurance policy is ultimately your responsibility. 

If you’ve financed your vehicle, the lienholder will require you to carry physical damage coverages of collision and comprehensive on its asset, the vehicle. 

You’re the one who is then required to obtain and maintain the car insurance policy on the vehicle.  So, when shopping for insurance you need to request car insurance quotes on a policy that includes not only the state-required liability insurance, but also collision and comprehensive coverages that protect the vehicle itself.

Some auto insurance providers have filed their rates with the state so that if people state that they have financed a vehicle it will always include collision and comprehensive as part of the rate quote -- but not all auto insurers do this. 

When comparison-shopping for a car insurance policy, you may come across some quote forms that include physical damages automatically as part of the “required” coverages, and others where they leave it up to you to choose to add it to the policy.  It's thus important at the end of a quote, and before you purchase the policy, to review what the policy will cover and make sure all your needs are met.

Your lender may also require that your chosen deductible for these coverages is set at a maximum amount (such as $500) so that it’s more likely that you’ll be able to afford to pay the deductible if you must file a claim.   Your car insurance company isn’t going to know this, so again it’s your responsibility to choose a deductible of the maximum amount or less so that you comply with your finance contract.

If you fail to pick collision and comprehensive as part of your policy, then you can’t blame your auto insurance provider if you get in trouble with your lienholder or are left in a financial crunch if the car is in an accident and only then discover that you didn’t have right coverage on the vehicle. (See “How to insure a new car”)

Before purchasing a new car, we’d recommend you read our comprehensive guide to coverage definitions so that you are well aware of what each coverage type has to offer, and which are usually required by the state, finance institutions or leasing companies.   

When shopping for car insurance, make certain you know what coverages you must carry, and what extras you want to purchase, so that your final policy meets your all of your needs.  And once you buy auto insurance for your car and receive a copy of the policy, read it over to make certain it is correct.  (See “5 things to double-check on your new policy.”)

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