Car Insurance for Financed Car: 3 Most Required Coverage

When you want to finance a car through a loan, your financier may require you to provide full car insurance coverage. This is to ensure that you will be able to maintain the car within the financing period in case there is any damage to it. 

If you are still financing a car through a loan, it doesn’t belong to you; it belongs to your lender until you pay completely for it. Within this period, you are expected to safeguard the car through full insurance coverage so that the financing institution will be confident that their investment is protected should there be damages.

Most financial institutions that offer financed cars require lienholders to provide their full car insurance plans, which must include collision insurance coverage, liability insurance coverage, and comprehensive insurance coverage. Once your car insurance plan contains these coverage options, you can get a financed car from a financing institution of your choice. 

Is it Compulsory to Have Car Insurance for a Financed Car?

Yes, it is compulsory to have car insurance for a financed car. If you want to get car financing, you will be expected to provide your car insurance plan or show readiness to do that after getting the car. The lender or lessors that offer a financed car will not give you the car without you having auto insurance coverage or showing a strong desire to do that. Most of the companies that give out loaner cars to lienholders often require full insurance coverage for their cars because they always want to protect their cars against any form of damage since it is their investment. This means that before you can get financed cars, you must have a full insurance package plan to show your readiness and willingness to take care of the car against all sorts of risks should they occur. 

Car Insurance Coverages for Financed Car

The company that offers financed cars always requires interested individuals who want to get cars on loan to have different car insurance plans to protect the car. When you get a car on loan, the car is not yours; it still belongs to the company that loaned or leased it to you until you complete your payment. The common car insurance coverages for financed cars are: 

1. Collision Insurance Coverage

This is one of the car insurance coverages that you must have when you get financed cars. The collision coverage is primarily designed to cover and pay for damages that occur to the car that you loaned or leased due to collision. This kind of insurance coverage pays for damage that occurs to the cars due to stationary objects, irrespective of who is at fault when the accident occurs. 

2. Liability Insurance Coverage

This is another insurance coverage option that sponsors of loaned cars always require those that take the financed cars to opt for. Liability insurance is designed such that it can pay for injuries and damages that the user of the financed car causes to others. This kind of insurance comes in two ways: property damage liability and bodily injury liability. Although this insurance coverage is for all car owners and lienholders, if you are using or want to get a financed car, you are expected to get liability insurance for it. 

3. Comprehensive Insurance Coverage

Comprehensive coverage is another form of car insurance for financed car. It pays for non-collision damages, like theft, vandalism, etc. If the car you loaned or leased is affected by non-collision damages, this type of insurance covers it. This insurance coverage pays for any form of damage to the car that didn’t result from a collision. And it is compulsory if you really want to finance a car through a loan. So you should ensure that your car insurance plan contains it before looking for a lender or lessor. 

Is it Costlier to Insure a Financed Car?

Yes, insuring a financed car is always more expensive because, as a lienholder, you are expected to have comprehensive and collision coverage in your insurance policy before you can get a financed car. According to consumercoverage.com, insuring a loaned car requires you to have a compulsory insurance policy, but if you want to insure the car you own, you can choose to go for a particular insurance plan and reject those that don’t suit you. This means that insuring a financed car is always costlier. 

What is the Cost of Car Insurance for Financed Car?

According to bankrate.com, the average annual car insurance cost for a financed car is $2,542. This cost is for the full insurance coverage. However, if you want minimum insurance coverage, it is definitely going to be cheaper, but the problem is that not all financial institutions will accept minimum insurance coverage for financing a car. Hence, you will need full coverage to be able to get a financier. 

Insurance Companies that offer Auto Insurance for Financed Car

There are many insurance companies that offer insurance for financed cars. These insurance companies allow lienholders to take up an insurance policy that can cover the car they are financing while they are paying the loans. Some of the popular ones among them are:

1. Geico Insurance Company

This is one of the insurance companies that offers insurance policies for financed cars. Geico Insurance Company has been in operation for the past ten decades. According to the Geico website, they offer different kinds of auto insurance to lienholders, like collision coverage insurance, comprehensive coverage insurance, etc. Currently, the company is insuring more than 28 million vehicles for their policyholders.

2. Liberty Mutual Insurance Company

This is another insurance company that offers insurance coverage for financed cars. Liberty Mutual Insurance Company was established in 1912. According to their website, they offer both liberty, collision, and comprehensive insurance for financed cars. This insurance company is ranked as the sixth-largest property and casualty insurer globally. Although they also insure other properties in addition to financed cars. 

3. Allstate Insurance Company

Established in 1931, Allstate Insurance Company also offers insurance coverages for financed cars. They offer a wide variety of auto insurance plans, like comprehensive coverage, liability coverage, and collision coverage, among others. As of 2023, the current revenue of Allstate Insurance Company is US$57.09 billion 

4. State Farm Insurance Company

With over 100 years of existence, State Farm offers insurance plans to lienholders. They have various insurance policies for financed cars, like comprehensive insurance coverage, collision insurance coverage, etc. This insurance company is the biggest auto insurance provider in the US, with total revenue of up to US$294.82 billion

5. Amica Mutual Insurance Company

Like other insurance companies mentioned above, Amica Insurance also offers insurance coverage for financed cars. The company was established in 1907, and it has been operational up to date. They offer different kinds of auto insurance coverages, like liability insurance, comprehensive insurance, collision insurance, etc. As of 2022, the Amica Mutual Insurance company is worth $5.4 billion. 

Conclusion

Getting a financed car requires you to have full insurance coverage, like comprehensive, liability, and collision insurance coverage. Although insuring a financed car is always costlier than insuring the one you own, there are many auto insurance companies, like Amica Mutual, State Farm, Liberty Mutual, etc., that offer insurance coverage to lienholders. Some of them have a good track record and have been in existence for decades.