If you are thinking of financing a vehicle for the first time, then you may be intimidated by the process. However, most car purchases will usually involve at least some form of financing, although financing a vehicle will also increase the final cost of the vehicle in question. Furthermore, obtaining financing for an automobile may also affect your auto insurance coverage.
For instance, you may receive reduced coverage for your vehicle during the months where it is not in use. You may need to think about adding other lenders to your insurance policy, as well as whether or not you want to buy a new or used automobile. Here, we will discuss auto insurance in Pembroke and how financing a vehicle can affect your auto insurance coverage
Reduced Coverage During Non-Use Months
In the majority of cases, a car that is financed or leased will be required to include comprehensive auto insurance coverage for the entire year until the loan is fully paid off per the lender. However, every lender is different, as some may allow you to place your car in storage when you are not using it.
You will in most cases, be required to provide proof that the car was not in use. This means you will likely be asked to provide documentation from your insurance provider as well as provide your signature in order to verify that you will not be operating your car for a given period of time. If in doubt, do not hesitate to discuss such matters with all parties involved as you do not want to be subject to fines or lost coverage due to negligence or ignorance on your part.
There may be several reasons why you may decide to place your car in storage. For instance, you may be going on a long trip overseas or may have become ill or injured, which may mean that you may not be able to operate your car for an extended period. Some people also enjoy migrating to warmer countries during the winter, and so will not be able to access their vehicle for several months during the year.
Regardless of the reason, simply dropping your auto insurance is not the ideal solution. That is, while some people will do so because they feel they will enjoy savings by not having to pay monthly insurance premiums, cancelling your auto insurance coverage may backfire in the long run.
For instance, if you cancel coverage for your stored vehicle, then you will create a division in your insurance history and it may upgrade you to a high-risk candidate. As such, when you do decide to take your car out of storage and reinstate your insurance policy, your insurer may ask you to pay higher premiums to do so, which will essentially negate any short-term savings you may have enjoyed after having cancelled your insurance.
Adding Lenders to Insurance Policies
Your lender will ask that they are included in your auto insurance policy as a loss payee to protect their best interests. As a result, your insurance carrier will update loss payees via online or snail mail if any changes are made to the insurance policy regarding the automobile that they are listed on.
In other words, if you decide to make certain modifications to your auto insurance in Pembroke, then the company that issued the loan will be the first party to be notified of the changes that you made.
Also, please note that a loss payee will need to be added to any insurance policy in Pembroke that involves the use of collateral to secure a loan. In fact, it does not have to be an automobile, as a home, motorcycle, or boat will also need to be insured by the lender. De facto, you must consent to carry a form of insurance of the secured piece of property. Otherwise, you may be subject to forced placed insurance, per the lender agreement, so please be forthright with your lender before deciding on which is best for you.
Buying a New or Newer Car
If you decide to purchase a new vehicle or if you opt to upgrade to a better car then your auto insurance rates will likely change as a result. In most cases, you can expect to pay more for a more expensive car. That is, your rates will likely increase because you will be insuring an automobile that costs more.
In fact, while the year of the vehicle will influence how much you pay, even the safety rating will have an impact, so you may want to think carefully about whether or not you wish to buy a new, or better car going forward.
Final Caveats
Please note that strictly speaking, there will be no extra cost for your auto insurance coverage if you have taken out a loan on your car; assuming of course that the course is the same for both. However, given the possibility that your specific situation may be different, you may be subject to higher premiums after you have taken out a car loan.
In other words, you may be expected to pay more because your loan provider may require certain types of insurance coverage that end up exceeding the minimum coverage limit stipulated by the Province / State.
To further illustrate, imagine you live in a city or Province / State that has a minimum legal requirement in order to obtain liability coverage. In such a scenario, they may not demand that you have other forms of coverage, such as comprehensive or collision, but your particular lender may demand that you do in order to obtain the loan: Ergo, your premiums will go up as a result of the additional types of coverage included.
Author Bio:
Monica Benoit is the community manager at EGM Insurance. She loves to write about insurance and the critical indicators that drive the industry’s results. She leverages her knowledge to educate people on the new updates in the insurance industry.
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