Drop collision while I have a Car loan.?
Out if curiosity, what would happen if I dropped my collision/comprehensive coverage while I still had a car loan. Would the insurance company contact my lienholder?
- zipperLv 68 months ago
The loan company can charge you a surcharge for not having full coverage. If you know it or not the insurance will send a notice to the loan company of any changes you make. Your far better off keeping the full coverage until the loan is paiid off!
- MercuryLv 79 months ago
Not if you have any common sense.
- 9 months ago
- Obi Wan KnievelLv 79 months ago
Since there is a lien on your vehicle, hell yes the insurance company would let them know. The lienholder gets a copy of your policy, plus any changes you make to it.
The big question is what does your loan contract say? Registering a lien on a vehicle doesn't automatically give the lender the right to insist that you carry Collision coverage, that has to be spelled out as a condition in the contract. Unless the contract says you agree to carry specific insurance coverage (like Collision, for example) until the loan is paid off, the lender can't make you buy any insurance at all.
Since the contract probably does say you agreed to carry Collision coverage (they rarely forget to put that condition in), what you want to do is ask your lender. And ask them before you make any changes to your coverage, not after they get a copy of your policy and call you.
If you ask in advance, they might just say no problem. I've gone without Collision coverage on financed vehicles before, and my lender had no problem with it. Because I asked in advance and the vehicle was going into storage.
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- MayLv 69 months ago
Bad things would happen. Yes, your lien holder would know and they would buy collision coverage for THEIR car and charge you for it. It would be SUPER expensive.
They might even repossess the car. Don't even think about doing such a foolish thing.
- regeruggedLv 79 months ago
Yes, if the lienholder is listed on the policy. If your vehicle gets damaged, you will have to pay for repairs yourself. If you lien holder finds out you don't have coverage, they will buy insurance to cover their interest and add the expense to your loan.
- Coffee DrinkerLv 79 months ago
When you first set up coverage on this vehicle you notified your insurance company that the vehicle was financed. They made note of that info and listed your bank as the lien holder to ensure that if your car was totaled they would know that they need to pay the bank first, before giving you any money.
Now if you cancel the collision and/or comprehensive insurance they will notify your bank that you dropped the coverage. At that point your bank will purchase collision and comprehensive coverage for you and add the premium to your minimum monthly payment. They don't shop around for the best price so plan on this costing about double what you're paying now (or what you would pay if you shop around and switch coverage to a new provider of your choice).
If you don't pay the increased monthly payment to cover the loan repayment AND the overpriced insurance, then they will declare that you're in default on your loan and they'll start collection efforts and eventually move to repossession.
IF you somehow slip through the cracks and cancel without your lender being notified, then you will be sued if/when the car is damaged. They will win a judgement against you and garnish wages or levy bank accounts if you do not pay.
Bottom line - don't cancel. If you don't like your current provider then shop around and pick a new provider, notify your bank and switch the coverage. You have the right to pick your provider, as long as you have coverage. If you can't afford the payment and the required insurance then you cannot afford the vehicle.
- PLv 79 months ago
They would contact your bank and then your bank would get expensive insurance and send you the bill or possibly even repossess your car.
- JoeLv 79 months ago
Yes. They have your finance company listed on the policy.
(Same thing with your home mortgage, if you tried to cancel your fire insurance.)
- KellyLv 79 months ago
I did this in my young, stupid & broke days (mostly broke)....
The bank/finance company will add their own and it's expensive AF.. they find out some how so I assume the insurance company notifies them as the lien holder.
They added the price of the policy onto the loan.
The insurance policy they add only covers them/their losses, not you.