Insurance Requirements You Should Know Before Financing A Vehicle
Insurance Requirements You Should Know Before Financing A Vehicle
If you are in the process of purchasing a vehicle in the state of Michigan it is important to have your auto insurance prepared before you sign your lease or loan contract. Auto dealers and loan lenders will require that you obtain Michigan auto insurance before you drive off the lot if you do not currently own a vehicle with insurance. To prevent delays and rushing you should contact local insurance agents and retrieve price quotes. Know what the lender requires when you are purchasing a vehicle and have exactly what you need to drive off the lot with the car of your dreams.
Comprehensive coverage, also referred to as comp, is a part of physical damage coverage that will pay to repair or replace your vehicle in the event of a covered loss. Losses covered under comprehensive cover include fire, theft, vandalism, wind, hail, falling objects, and hitting a live animal. When you choose comprehensive coverage you will be required to choose a deductible. The amount of the deductible is how much you are responsible for in the event of a claim. The insurance company will not pay unless damages exceed the deductible amount. Some lenders may require you choose low deductible amounts to ensure you can afford repairing the vehicle.
Collision coverage will pay to repair or replace your vehicle in the event of an accident. Generally collision is used to pay for vehicle repairs when you are deemed at-fault for the loss. In some scenarios when you are hit by an uninsured motorist your collision coverage will pay out. Collision coverage will only pay up to the fair market value of your vehicle. It is important to remember that when you drive a vehicle off the lot it depreciates immediately. If you owe more than the vehicle is worth and you do not carry gap insurance you will be required to pay the difference of the value and loan balance out of pocket. Michigan auto insurance collision deductibles are generally higher than comprehensive deductibles because the premium amounts are higher.
The lender will require you to list the finance company as the loss payee. This means the company holds the title and will receive payment first in the event of a loss. If you fail to list the lender as a loss payee, the lender has the right to force place insurance on your vehicle. Forced placed insurance is very expensive and will only cover damage to the vehicle.
Prepare a comprehensive Michigan auto insurance policy that will protect both you and the lender. By obtaining quotes early, you can pick the most affordable premium with the best coverage. Walk into the finance office prepared and drive away with your new car.
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