Auto insurance is a form of risk management used against potential contingent loss of a vehicle. Auto insurance is a contract agreement between an insured policyholder and an insurance company. In exchange for a premium, the insurance company provides coverage for property damage liability, bodily injury and uninsured motorist, if desired. Auto insurance usually goes hand in hand with automotive loans. Auto loan companies require that borrowers obtain full coverage auto insurance to protect their interests in the loan.
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Auto loans have different requirements depending on which lender is used. Most auto loan firms usually share the demand that auto insurance will make them whole, in the event of a total car wreck. This is to eliminate any financial liability on the part of the lender. Lenders require that this expensive type of insurance is obtained because it protects them from losing their consumer investment. It is especially important because often, a consumer is also not able to work after a serious car crash, which would make them unable to pay on the loan for the vehicle. In addition, the policy is in place to ensure that a consumer won't have to continue to pay for a vehicle that has been rendered unusable.
2The amount and type of auto insurance required on auto loans will depend upon what state you reside in and which lender is used. Usually there are no minimum deductible requirements for collision and comprehensive, which includes fire and theft. The maximum deductible is often around $1,000 dollars. It is the choice of the consumer whom they buy auto insurance from. Some lenders include the convenience of also offering auto insurance services in their portfolio of offerings.
3According to Loan.com, notations for interest charges may be added to the auto insurance to cover the lender that is financing or leasing the automobile to you. However, requirements vary from state to state, and from one lender to another. It's important to check for local requirements. Add the lender as an additional insured on the insurance policy to protect the lender's interest in the vehicle.
4Show proof of auto insurance to the lender in order for the auto loan to be valid by surrendering a copy of an existing policy on the last car insured. Usually this will be sufficient in order to secure the loan. Any proof of insurance should also include the person in question on the policy. When the applicant produces a copy of their current or former auto policy, they can usually obtain a temporary insurance provision when purchasing a new car. If the loan applicant does not currently own a car, it will be required that they secure auto insurance and produce proof of it before the loan process will be complete and in effect. This is a standard requirement for most kinds of auto loans.
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