When a vehicle owner takes out a loan to pay for his or her car, the lender will require that physical damage coverage placed on the vehicle until the loan is paid off. If the vehicle owner refuses to do so and allows the coverage to lapse, the lender has the right to put forced placed auto insurance coverage on it.
The lender will buy an insurance policy to protect its’ interest in the vehicle. This type of policy does not include any liability coverage, which pays for personal injury and damage claims on the vehicle owner’s behalf. When forced placed auto insurance coverage is put on the vehicle, the lender will add the cost of premiums to the outstanding loan.
The vehicle owner is better off shopping for and buying his or her own auto insurance coverage, as opposed to having the lender put forced placed auto insurance in place. Driving without liability coverage in place is illegal in most states, and getting caught without having this protection in force means that the vehicle owner may be facing a fine and/or having his or her driving privileges and registration revoked.
Penalty for Failing to Pay for Force Placed Auto Insurance
If the vehicle owner refuses to pay for the forced placed auto insurance coverage the lender has bought, the bank or financial institution may call the loan. The lender will demand that the entire outstanding balance be paid by the borrower immediately. The vehicle owner would be required to pay off the car within 60 or 90 days. If the vehicle owner does not pay off the amount of the outstanding loan, the lender may then take steps to repossess the vehicle.
The lender also has the option of filing suit against the vehicle owner to recover the amount of the extending loan and the cost of the forced placed insurance coverage.
Find Affordable Auto Insurance Coverage
Rather than run the risk of being put in a position where the lender will put forced placed auto insurance coverage in place, the vehicle owners can shop around to find affordable coverage. The vehicle owner can switch providers if any time once the policy has been issued, and the insurance company will issue a refund for any unused premiums paid.
The Internet makes looking for auto insurance coverage and easy and convenient process. If the goal is to keep coverage costs down, the vehicle owner should look for a basic policy which provides a good level of coverage, including collision and comprehensive protection, without adding a lot of frills which only drive up the cost of coverage.
Since each auto insurance provider sets its own rates for coverage, rates will vary significantly between companies. Taking the time to shop around and get quotes from different providers can help a driver avoid overpaying for the coverage he or she needs.
Since Forced placed auto insurance coverage is only put in place when collapses occurred, this can make it difficult for vehicle owners to arrange for coverage from the new company.