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Can my bank add insurance to my loan?

In most states, a bank will retain the legal right to force an insurance policy upon a vehicle that they are financing if the vehicle's operator will not purchase it. A bank's primary aim is to protect its property. Until you have paid your car loan in full, the vehicle essentially belongs to the bank. Should you default on your loan payments, a bank can repossess the car. Generally after a car is repossessed, it is sold at an auction so that the bank can recoup some of the money it loaned to you.

It can be quite costly to you if a bank forces a policy upon your car. The bank will select the amount of coverage it believes you should have, and the cost of the policy is factored into the total amount you pay monthly on your car loan. A bank can easily select the maximum amounts of coverage available in a policy to ensure that their collateral is protected. This will result in extraordinarily high premiums for the automobile. These actions are considered to be legal because they are usually written into the fine print of a lender/consumer contract. 

Most states will require you to maintain liability insurance. However, if you own a car with an outstanding loan on it, you will be legally required to include collision insurance in your coverage. Collision insurance will only provide a monetary amount towards the cost of your repairs that is equal to the current market value of your car. For this reason, most policyholders will elect to add comprehensive insurance to their policy as a supplement to collision insurance. Comprehensive insurance provides coverage in the event that your car suffers damages from an act of nature or a crime. While comprehensive insurance remains an elective choice, a bank may force it upon you if they must add an insurance policy to your vehicle. Consequently, the amount of your car payments will rise dramatically because the choice in the kinds of coverage you have has been removed from your hands. 

As stated, the mandatory coverage for a financed vehicle includes comprehensive insurance and collision insurance. The amounts that you will pay for such insurance is based upon a multitude of factors including your vehicle, your location, the deductible, and the driving histories of any motorists who will be operating the vehicle. In order to receive the most affordable rates for your premiums, you can go online to receive an automobile insurance quotes. This provides you with a list of the prices different companies will charge you for your desired policy. 

While it remains that a bank may select the maximum amounts of coverage for your vehicle, it is also quite possible that the bank will choose a policy that does not meet the requirements for coverage for your state. If you are involved in an accident with insufficient coverage, you may be opening yourself up to many legal and financial ramifications. The consequences that can occur because you shirk your legal responsibilities can be dire. Make sure you know what is included if your banks opts to force coverage on your loan.


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