Can you have no insurance on a financed car? (2021)


Every car owner knows that paying for and maintaining a vehicle is expensive. If you’re financing a vehicle on a tight budget, you might be wondering if you can drive it without auto insurance, but we don’t recommend driving without insurance on a funded car.

In this article, we’ll walk you through the insurance requirements that keep your financed vehicle safe and what you can do if you can’t pay your insurance premium.

If you are looking for new auto insurance, use our tool below or call (844) 246-8209 to compare quotes from the best auto insurance providers.

In this article:

Should you buy insurance on a financed car?

Yes, funded cars must be insured. Until your funded car is fully reimbursed, the car is owned by your lien holder, and the lien holder determines the level of insurance coverage necessary for you to operate the vehicle.

What does this mean to you?

Lien holders generally require “full coverage” vehicle insurance, which includes collision insurance, full coverage, and liability coverage. Here’s what each of these types of auto insurance coverage means in a nutshell:

  • Collision insurance: Collision insurance repairs or replaces your own vehicle after an accident.
  • Comprehensive auto insurance: Comprehensive insurance repairs or replaces your car if it is stolen or damaged by a non-collision event such as a natural disaster or vandalism.
  • Automobile liability insurance: Liability insurance covers material damage and medical costs for the other driver in the event of fault in an accident.

Some lenders also require you to have spread insurance. This covers the difference between your current loan and the actual cash value of your car in the event of total loss.

What if you don’t insure a funded car?

If your lien holder requires full coverage insurance and you do not purchase full coverage insurance, it is a violation of your contract. The lien holder can legally cancel your auto loan and repossess their vehicle if the company finds you driving uninsured on a funded car.

If your lien holder finds out that you are driving without insurance, the company may put “forced insurance” on your account.

It is not a good thing.

Forced insurance means the lien holder purchases the required level of insurance and then equates the cost to your monthly payments. Forced insurance premiums can be very high. Plus, compulsory insurance is designed to protect your car loan provider, not you.

Additionally, it is illegal to drive without car insurance. If you’re caught driving without insurance, you could be ordered to pay fines, your driver’s license could be revoked, and you could even be sentenced to jail.

How much does insurance cost on a financed car?

Since operating a financed car often requires fully covered auto insurance, the cost of insurance is relatively high.

The cost of insuring your funded car depends on a variety of factors including your age, gender, and driving record. According to a 2019 AAA study, the average cost of full coverage insurance on a midsize sedan was $ 1,251 per year.

As with all types of auto insurance, higher deductibles are associated with lower premium costs.

So if you want a lower premium and are confident that you could afford a deductible of around $ 1,000 in the event of an accident, you might consider requesting a higher auto insurance deductible from your provider. auto insurance chosen.

What if I can’t afford insurance?

Whether or not you feel like you can afford auto insurance right now, you need to have it to drive the car you are financing or plan to finance.

Here are five tips to lower your auto insurance rates and start saving money for insurance.

  1. Get quotes from multiple providers to find cheap auto insurance.
  2. Refinance your car for a longer term if possible to lower your car payments.
  3. Develop a comprehensive budget and reduce unnecessary or excessive expenses in your life.
  4. Check with your auto insurance company about discounts you may be eligible for, such as driver coupons and bundle discounts.
  5. Work to improve your credit score over time, as credit scores affect insurance rates in most states.

Our recommendations for auto insurance providers

You should purchase comprehensive insurance if you are financing or planning to finance a car. It just isn’t worth driving without insurance on a funded car.

To find the right provider, we recommend that you get auto insurance quotes from multiple insurers so you can compare coverage and rates.

In addition to which insurance company you choose, factors such as your age, make and model of your vehicle, and your driving history can affect your premium, so what’s best for your neighbor. may not be the best for you.

Our review team has analyzed the best insurance providers in the industry and compiled a list of the best auto insurance companies that you may find useful in your research. Three providers that offer affordable full coverage auto insurance include Geico, USAA, and State Farm.

Geico is one of the largest insurance companies in the United States and our pick for the best overall auto insurance company.

As a member of the national holding company Berkshire Hathaway, Geico collected more than $ 34 billion in premiums in 2019, according to the National Association of Insurance Commissioners.

Geico auto insurance received a 4.5 star rating in our review for its availability, affordability, and excellent customer service. The company holds an A ++ financial strength rating from AM Best, which means Geico is well positioned to pay member claims.

Read our full Geico auto insurance review.

USAA Insurance Logo

For those who are serving or have served in the military and their families, USAA auto insurance is an exceptional option. Based in San Antonio, USAA stands for United Services Automobile Association and has over 12.8 million members.

USAA received a 5.0 star rating from our review team for its excellent claims service, availability, and cost. Like Geico, USAA holds an A ++ AM Best rating, the highest possible rating for financial stability.

Read our full review of USAA auto insurance.

State Farm Insurance Logo

The nation’s largest auto insurance company, State Farm, offers comprehensive coverage with great discounts for students, bundled insurance and new drivers.

We particularly like State Farm Auto Insurance for its safe driving programs.

Drive Safe & Save ™ can save you money by monitoring your safe driving habits, such as braking smoothly and not accelerating too quickly. For young drivers there is Steer ClearⓇ, which promotes safe driving habits and reinforces the rules of the road.

Read our full State Farm auto insurance review.

To find out how much you would pay for your auto insurance policy, use our tool below or call our team at (844) 246-8209 to start comparing personalized auto insurance quotes:

FAQ: No insurance on a financed car

Read our other articles on auto insurance:


About Mary Moser

Check Also

How Buffett is posing as a crook on rising interest rates

Warren Buffett’s Berkshire Hathaway benefits from low-cost investment funding – Image: Shutterstock Warren Buffett’s Berkshire …

Leave a Reply

Your email address will not be published.