What insurance do I need to finance a car?

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Things to remember...
  • Many financial institutions require full coverage car insurance before financing a car
  • You will probably have to purchase a car insurance policy that includes liability, collision and comprehensive
  • To find an affordable full coverage insurance policy for your financed vehicle, you should use a comparison tool

When you finance a new car, you will need full coverage car insurance.

When insurance agents and other drivers talk about full coverage car insurance, they are referring to a policy that includes:

This type of full-featured policy protects you whether you are at fault or someone else is at fault, in the case of an accident.

Start comparison shopping today with our FREE online quote tool! Enter your ZIP code above to get started.

The Reason for Full Coverage Auto Insurance

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Finance companies want to protect their investment.

When you take out a loan for the purchase of a vehicle, the financial institution has a vested interest in your vehicle until you pay off your loan.

If you miss a payment or default on the loan, they have the option of repossessing the car and selling it in order to satisfy the terms of your loan.

If the vehicle is damaged at the time of the repossession, the finance company will incur the costs. Instead of risking this loss, the finance company wants to insure you can cover this cost in the case of an accident.

We’ll discuss the three types of coverage these companies require:

– Liability

In order to satisfy the requirements of your state’s insurance laws, you will need to purchase a policy that includes liability insurance. Even vehicles that are paid off must have a minimum amount of liability coverage.

This policy pays for the damages caused by you if you hit another vehicle or damage someone else’s property with your vehicle. Liability insurance does not come with a deductible.

– Collision

Collision insurance is required by financial institutions because it pays for the damage to your vehicle if you are the one that caused the accident.

If you hit another vehicle or damage your car by hitting an object, your collision policy pays for the damage to your car minus the amount of your deductible.

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– Comprehensive

The comprehensive portion of your insurance policy covers damage to your vehicle that did not occur while you were driving it.

Common comprehensive claims include:

Comprehensive insurance may or may not have an associated deductible.

– GAP Insurance

To protect yourself, you may want to consider purchasing a GAP insurance policy along with your full coverage insurance policy.

GAP insurance protects you against financial loss if you get into a car accident that results in your car being declared a total loss.

When a car is declared a total loss, the insurance company offers you the value of your car instead of replacing your vehicle.

If this amount is less than what you owe on your car loan, you will have to pay off the remainder of that money out of pocket. GAP insurance ensures that you are not paying thousands once your vehicle is totaled.

Finding an Affordable Policy

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If you know you are going to finance a new car ahead of time, it is in your best interest to use a comparison tool to compare prices.

Different years, makes, and models of vehicles cost all affect your insurance rate. The insurance company assesses a risk factor to each class and year of vehicle.

When it comes to insuring a new car, the price of your auto insurance policy are all influenced by factors, such as the car’s:

  • Safety features
  • Safety record
  • Horsepower
  • Overall cost
  • Likelihood of being stolen

One of the ways you can mitigate that cost is by comparing quotes for the vehicles you are considering purchasing. Comparing quotes will help you determine if the car is affordable in the long run.

Start comparing quotes today by entering your zip code below!

FREE Auto Insurance Comparison

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