Do you love that new car smell? Or maybe you would rather save cash and buy a used vehicle? Whatever your preference, chances are you’ll finance the purchase of your new car. According to Experian, the majority of consumers rely on loans to finance new vehicle purchases. If you are one of them, that means your new payment obligation is likely to be met with another obligation – full coverage auto insurance. Continue reading to learn more about lender-required auto insurance and how it may affect you and your premiums.
Most drivers are aware that the State of Wisconsin requires a minimum of car insurance coverage that includes liability protection. However, lenders also have an interest in your coverage selections, as they need to know that the vehicle that secures your car loan is protected against potential damages. That is why most lenders require drivers to purchase full coverage auto insurance including collision and comprehensive protection.
What is Full Coverage?
To begin with, “Full Coverage” insurance doesn’t actually exist. While the term has been used for a number of years, there is no insurance policy that includes the term “Full Coverage.”
What we’ve come to know as “Full Coverage” is actually auto insurance that includes both comprehensive and collision protection. Unlike liability, which looks after the interests of a victim’s injuries and property damages in an accident, full coverage takes care of your own property damages. Until you own your vehicle outright, your lender wants to make sure it will not lose its value due to a collision or other event. By requiring full coverage, your lien holder can ensure your car is repaired after a fender bender or hailstorm, and that the loan is paid if your vehicle is completely destroyed or stolen.
Keep in mind that your loan agreement may specify the exact type and amount of coverage you need to maintain on your vehicle. If you fail to do carry what is required by your lender, you might face serious financial consequences. After all, a loan is a contract between you and your lender. If you default on the terms of that contract, the Federal Trade Commission warns that it could lead to repossession.
The details on what is considered to be a full coverage policy will vary from insurer to insurer, but there are some basic guidelines that most carriers follow when issuing coverage. Generally speaking, collision insurance is purchased according to the value of your vehicle. It can pay for repairs to your vehicle if you are responsible for an accident or if you are hit by a driver who does not have adequate liability limits. You are typically responsible for paying a deductible – often between $250 and $1,000 – before insurance will pick up the remainder of the bill. If your vehicle is totaled, your insurance company will reimburse your lender for the current value of your vehicle less your deductible.
Comprehensive insurance, on the other hand, does not cover damages from a collision, but rather those stemming from other events outside your control. Again, you pay a small deductible – often as low as $250 – and your insurer can cover the remainder of your losses. That means that your vehicle could be easily repaired if a tree branch falls on your car or high winds blow it onto its side. Your lender could also be reimbursed if a natural disaster, fire, or even theft makes your vehicle a total loss.
Get a Quote for Full Coverage Auto Insurance
We here at Couri Insurance are committed to assisting our customers with personalized service and insurance coverage that meets their needs and expectations. If you recently financed a vehicle or are considering doing so in the near future, contact our office to discuss your full coverage auto insurance options. We can’t wait to save you money on the coverage you need.