Can my bank charge me for car insurance?
I have my car financed through a bank right now. Can the bank charge me for their insurance policy when I had a gap for two months? I missed two months of payments on my previous insurance, but insurance was a condition of the loan.
Thank you for reaching out to The Zebra. This is an excellent question! When you finance a vehicle through a credit union or bank, they will require you to carry state minimum coverages, as well as comprehensive and collision coverage, on your vehicle. When you get approved for an auto loan the lender will usually write into the contract that if your insurance lapses, they'll obtain insurance for your vehicle on your behalf to protect their interest.
"Force-placed" insurance (or lender-placed) is when you're contractually required to have that coverage, and it lapses (like your two months without coverage) so they will provide the coverage for you. That means they choose the insurer, not you, but they cannot add extra coverages beyond what's required in the loan contract. Placing insurance on the car protects your financial institution in the event you total your vehicle and have not paid off the loan yet, so it is understandable that they need to protect themselves. Force-placing insurance is also referred to as collateral protection insurance. Typically, a lender will reach out to you before they force-place insurance. If by chance someone is actually insured and still gets charged for force-placed insurance, the amount will be refunded by the lender upon proper documentation of coverage.
For specific rules and expectations around your auto loan, I recommend speaking directly to your lender. If you need to find insurance for your financed vehicle and want to be the one making the decisions instead of your bank, then give our agency a call at 888-444-8949 to get a personalized quote.
If you have any other questions about insurance, don't hesitate to ask.
Insurance is complicated, but it doesn't have to be.
The Zebra searches all of the top insurance companies, in one place, so you can compare the cost and coverage you need to protect your car, home and other property.
Step 1: Tell us a little about yourself
Choose an insurance product and enter your zip code to get started.
Step 2: Sip your coffee while we find the best quotes
Enter the necessary information and then sit back while we find quotes from 100 top insurance carriers.
Step 3: Compare your quotes
Compare quotes side-by-side to find the right match for you, whether it's home, auto, or more.
Step 4: Let our agents do the hard work for you
Once you pick your policy, our agents are here to get you over the finish line. Then just relax and enjoy your savings.