What Kind Of Insurance Is Necessary For A Financed/leased Vehicle?
If you're considering a new vehicle, you might also be considering a financing plan or a leasing plan for that vehicle. It's a logical option to keep on the table, especially if the car is expensive. However, before heading to the bank, it's important to realize that your auto insurance coverage may need to be different for a financed or leased vehicle, and it's also likely that your auto rates will change.
Most banks have requirements for the insurance of your car that are separate and greater than your state's mandated auto insurance minimums. The reason is fairly simple; the bank is investing in your ability to pay off the leased or financed car. If the car is seriously damaged or stolen, they want your auto insurance to cover the cost of the loan, because otherwise the bank would have to pay the remaining amount. They'll typically require you to purchase comprehensive coverage, which is auto insurance coverage that handles claims from non-collision incidents (if your car is stolen or damaged by an act of God, it's covered under a comprehensive coverage plan). The bank usually also requires collision coverage, which is auto insurance coverage for your car when you hit another car or an object–coverage that might be unnecessarily expensive if you own the car and the car is fairly old, since collision coverage is limited to the value of your automobile.
As a result of these different insurance requirements, your premiums will likely be higher for a leased or financed vehicle than they might be if you own the vehicle. Generally speaking, the bank won't dictate your deductible, so one way to get your auto insurance premiums lower is to opt for a higher deductible in your policy. Remember that you could potentially pay the deductible that you choose, so try to make sure to select a deductible that would be comfortable in the event of an accident. You can also sometimes lower your auto insurance premiums by taking defensive driving courses or installing anti-theft devices in your vehicle. If you already have an auto insurance policy, contact an agent at your insurance company to find out about potential discounts for your new car.
Nobody likes higher premiums, but if you're financing or leasing, the addition of collision and comprehensive coverage will probably drive rates a bit higher. Speak to your auto insurance agent and your bank to find ways to get lower rates. Remember to comparison shop for auto insurance quotes to find the best possible rate for your new vehicle when you're aware of the coverage limits set by your bank.
