Do I Notify the Lien Holder if I Change Auto Insurance Companies
The question of whether you need to notify the lien holder if you change auto insurance companies is one that a number of drivers may be curious about. You can change insurance companies at any time – even during policy term itself – if you want to. The new auto insurance company will look after letting the lien holder (the bank or financing company which holds the loan for your vehicle) know that you have changed companies. You will need to provide the name of your lender to your auto insurance provider.
Required Auto Insurance Coverage for a Financed Vehicle
If you take out a loan to pay for your vehicle, one of the conditions of receiving the funding will be that you keep full coverage on the vehicle. Both collision and comprehensive protection must be maintained until you have paid off the loan in full. The lender wants to make sure that its interests are protected in case the car is totaled in an accident.
In a situation where the car is written off, the lender receives the payout from the auto insurance company. The insurance company will write a check for the loss based on the vehicle’s cash value, less the policy deductible.
Collision auto insurance coverage pays for damage to the vehicle caused by coming into contact with another vehicle or an inanimate object. It is also used when your vehicle is involved in a rollover accident.
Comprehensive auto insurance coverage comes into play when the damage is caused by a loss other than a collision, including the following:
Broken windshield
Falling objects
Fire
Flooding
Hail
Hitting an animal
Theft
Vandalism
Wind
Once your vehicle has been paid off in full, you can let your auto insurance company know so that the lien holder is removed from your policy. After that point, you would receive any payment from the insurer if your car was totalled in an accident.
When to Drop Full Auto Insurance Coverage
Since collision and comprehensive coverage pays out based on the vehicle’s cash value, it may not make sense to keep full coverage in place on an older model vehicle. If your car’s Blue Book value is at or below your policy deductible, you are paying for coverage that you will not be able to benefit from if your car is involved in a serious accident.
You can save on the cost of your auto insurance coverage by dropping your collision coverage entirely. The insurance company will allow you to limit the losses covered under your comprehensive protection to fire and theft only, which will provide some coverage but reduce your auto insurance costs.
Once you are getting close to the end of your loan term, you should get quotes for an auto insurance policy which does not include full coverage. This type of a change in circumstances is a good time to consider whether a new company can offer you a better price for the coverage you need. Physical damage coverage accounts for a significant portion of the amount you pay for auto insurance, and you may be pleasantly surprised at the quotes you receive.
