Yes, whether you finance or own your car can affect your car insurance. If you finance your car, the lender may require you to have comprehensive and collision coverage as part of your insurance policy. This coverage is designed to protect the lender’s investment in the vehicle, and will pay out if the vehicle is damaged or destroyed in an accident.

If you own your car outright, you may still choose to carry comprehensive and collision coverage, but it is typically not required. Instead, you may choose to carry liability coverage, which is required by law in most Canadian provinces and is designed to protect you against financial loss in the event that you cause damage to someone else’s property or cause injury to someone else in an accident.

The type of coverage you choose, as well as your deductible, can affect the cost of your car insurance. If you finance your car, you may have to pay a higher premium for comprehensive and collision coverage, while if you own your car, you may be able to save money by choosing a lower deductible or by choosing liability coverage only.

Ultimately, whether you finance or own your car, it’s important to choose the right insurance coverage that meets your needs and budget.

Do You Have To Keep Full Coverage on a Financed car?

If you have a financed car, your lender may require you to have full coverage insurance, which typically includes both comprehensive and collision coverage. Full coverage insurance is designed to protect the lender’s investment in the vehicle, and will pay out if the vehicle is damaged or destroyed in an accident.

The exact requirements for full coverage insurance can vary depending on the lender, so it’s a good idea to check with your lender to see what they require. If you don’t carry the required insurance, your lender may purchase insurance on your behalf, which can be more expensive than if you were to purchase it yourself.

Even if your lender doesn’t require full coverage insurance, you may still choose to carry it to protect yourself and your investment in the vehicle. If you choose to drop full coverage insurance, it’s important to make sure you have enough savings to cover the cost of repairs or a replacement vehicle if the vehicle is damaged or destroyed in an accident.

When You Finance a Car Does it Include Insurance?

No, financing a car typically does not include insurance. While some lenders may offer insurance as an optional add-on to a car loan, the cost of insurance is usually not included in the loan itself.

If you have a financed car, you will need to purchase your own insurance coverage, either through your own insurance company or through one recommended by your lender. Your lender may require you to have comprehensive and collision coverage, which is designed to protect the lender’s investment in the vehicle, and will pay out if the vehicle is damaged or destroyed in an accident.

The exact requirements for insurance can vary depending on the lender, so it’s a good idea to check with your lender to see what they require. If you don’t carry the required insurance, your lender may purchase insurance on your behalf, which can be more expensive than if you were to purchase it yourself.

What Happens If I Get Into An Accident With a Financed Vehicle?

If you get into an accident with a financed vehicle, the process will depend on several factors, including your insurance coverage, the extent of the damage, and the requirements of your lender.

Here’s what you can expect to happen:

1. Call the police: If anyone is injured or if there is significant property damage, it’s important to call the police and file a report. This report can help with any insurance claims you may make.
2. Notify your insurance company: If you have comprehensive and collision coverage, you should notify your insurance company as soon as possible after the accident. Your insurance company will guide you through the claims process and help you determine what coverage is available to you.
3. Notify your lender: If you have a financed car, you should also notify your lender of the accident. Your lender may have specific requirements for what needs to be done, so it’s important to follow their instructions.
4. Repair or replace the vehicle: If the damage to the vehicle is covered by your insurance, you will need to have it repaired or replaced. If the vehicle is a total loss, your insurance company will pay out the actual cash value of the vehicle, which is typically the market value of the vehicle before the accident.
5. Pay any deductibles: If you have comprehensive and collision coverage, you may need to pay a deductible, which is the amount you pay out of pocket before your insurance coverage kicks in.

FAQs

Here are some frequently asked questions related to car insurance for financed and owned cars:

1. Do I need full coverage insurance if my car is financed? Yes, if you have a car loan, most lenders will require you to carry comprehensive and collision coverage in addition to liability insurance. This is to protect the lender’s financial interest in the vehicle in case of an accident or other damage.
2. Can I have liability-only coverage if my car is owned outright? Yes, if you own your car outright, you can choose to carry only liability coverage. However, keep in mind that this will only cover damage or injury to others in an accident for which you are at fault, and will not cover any damage to your own vehicle.
3. Will my insurance premiums be higher if my car is financed? It’s possible that your insurance premiums may be higher if your car is financed, since lenders typically require more coverage than what is legally required. Additionally, if you have a loan, you may need to carry higher coverage limits to protect the lender’s financial interest in the vehicle. However, other factors such as your driving history, age, and the type of vehicle you own will also affect your insurance rates.
4. Are there any discounts for owning a car outright? Some insurance companies may offer discounts to drivers who own their cars outright, since they are considered to be less of a financial risk than those who are still making payments on their vehicles. However, the specific discounts and eligibility requirements may vary by insurer.
5. What happens if my financed car is totaled in an accident? If your financed car is totaled in an accident, your insurance company will typically pay out the actual cash value of the vehicle, which may be less than what you owe on the loan. In this case, you may still be responsible for paying off the remaining balance of the loan. Some insurers offer gap insurance, which can help cover the difference between the actual cash value and what you owe on the loan.
6. Can I switch insurance companies if my car is financed? Yes, you can switch insurance companies even if your car is financed. However, you will need to make sure that your new policy meets the requirements of your lender. This may include maintaining the same or higher levels of coverage as your previous policy.
7. What happens if I stop making payments on my financed car? If you stop making payments on your financed car, your lender may repossess the vehicle. If this happens, your insurance company will typically cancel your policy, since you no longer have an insurable interest in the vehicle. However, if you still need coverage for another vehicle or for liability protection, you will need to find a new insurance policy.
8. Can I remove full coverage insurance once my car is paid off? Yes, once you own your car outright, you can choose to remove full coverage insurance if you no longer want or need it. However, keep in mind that this will leave you financially responsible for any damage to your own vehicle in case of an accident. You should consider your personal financial situation and the value of your car before making a decision to remove full coverage insurance.
9. What happens if I get into an accident in a financed car with no insurance? If you get into an accident in a financed car with no insurance, you may be held personally liable for any damages or injuries caused in the accident. Additionally, your lender may take legal action against you to recoup any losses related to the damaged or destroyed vehicle. It’s always important to maintain adequate insurance coverage on a financed vehicle to protect both yourself and your lender.
10. Can I choose my own insurance company for a financed car? If your car is financed, your lender may have specific insurance requirements that you must meet, such as carrying certain coverage limits or naming the lender as a loss payee on your policy. However, in most cases, you are able to choose your own insurance company as long as you meet the lender’s requirements. It’s a good idea to shop around and compare insurance options to find the best coverage at the most affordable price.
11. Can I transfer insurance coverage to a new car if my current car is financed? Yes, you can typically transfer your insurance coverage to a new car, whether it is financed or owned outright. However, keep in mind that you may need to adjust your coverage levels or add new coverage options depending on the type of vehicle you purchase. If you are financing the new car, you will also need to ensure that your lender’s insurance requirements are met.
12. What is gap insurance and do I need it if my car is financed? Gap insurance is a type of coverage that can help cover the difference between the actual cash value of your vehicle and what you owe on your car loan in case of a total loss. If you are financing a car and owe more on the loan than the car is worth, gap insurance can be a valuable option to consider. However, if you own your car outright, you may not need gap insurance.
13. Can I lower my insurance premiums if my car is financed? There are a few ways you may be able to lower your insurance premiums if your car is financed. Some insurance companies offer discounts for drivers who bundle multiple policies, such as home and auto insurance. You may also be eligible for discounts based on your driving record, vehicle safety features, and other factors. Additionally, you can often adjust your coverage levels to find a policy that fits your budget.
14. What if my financed car is stolen or vandalized? If your financed car is stolen or vandalized, you should file a police report as soon as possible and contact your insurance company to report the incident. Depending on the type of coverage you have, your insurance may cover the cost of repairs or replacement of the vehicle.
15. Do I need to inform my lender if I switch insurance companies? Yes, you should inform your lender if you switch insurance companies, as they may require proof of insurance coverage to be sent to them. Your new insurance company can typically provide this documentation for you. Failure to maintain adequate insurance coverage can result in default on the loan and repossession of the vehicle.
16. Does the age of the car affect insurance premiums for financed and owned cars? Yes, the age of the car can affect insurance premiums for both financed and owned cars. Generally, older cars may have lower premiums because they are less expensive to repair or replace. However, this can vary depending on the type of car, its safety features, and other factors.
17. How can I find affordable car insurance for a financed or owned car? To find affordable car insurance for a financed or owned car, you should shop around and compare rates from multiple insurance companies. Look for companies that offer discounts for safe driving, vehicle safety features, or bundling multiple policies. You may also be able to save money by choosing a higher deductible, reducing your coverage levels, or adjusting other factors that affect your premiums.
18. Can I change my insurance coverage during the term of a car loan? Yes, you can typically change your insurance coverage during the term of a car loan, as long as you continue to meet the lender’s insurance requirements. However, if you make significant changes to your coverage or switch insurance companies, you should inform your lender to ensure that they have the necessary documentation on file.
19. What should I do if I have an accident in a financed or owned car? If you have an accident in a financed or owned car, you should first check to make sure everyone involved is safe and call for medical assistance if needed. Then, exchange insurance and contact information with the other driver(s) involved in the accident. Take photos of the damage and contact your insurance company as soon as possible to report the incident. If your car is financed, you should also inform your lender of the accident.