If you have a loan on your vehicle, what may some insurance companies require?

When you have a loan on your vehicle, some insurance companies often require that you maintain additional insurance coverage beyond the minimum legal requirements. This is primarily because the lender has a financial interest in the vehicle until the loan is fully repaid.

Minimum insurance coverage typically only meets the legal requirements set by the state, which may not protect the lender’s investment in case of theft, damage, or total loss of the vehicle. As a result, the lender wants assurance that their asset is adequately protected, which is why they may mandate comprehensive and collision insurance in addition to liability coverage.

Additional coverage helps ensure that if an accident occurs or the vehicle is damaged, there are sufficient funds available to either repair the vehicle or pay off the loan, minimizing financial risk for both the borrower and the lender. This requirement helps safeguard against potential losses that could arise during the time the loan is outstanding.