Question
Can a lender dictate what my deductible is?
The company financing my car advised me that I must have a $500 deductible for both comprehensive and collision coverage and that I must maintain this coverage through the life of my loan. It is entirely too expensive with some of the things on my driving record. I’m wondering if a lender is allowed to have a deductible requirement? If I am to make changes to the deductible amount, while still maintaining my comp and collision, is my insurance company required to notify them? Say, I change my deductibles to $2000 when it’s time to renew — will they send my lender a notice that I’ve made this change?
Answer
Unfortunately, the terms of your loan can dictate what your coverage deductibles must be. Your lienholder may not necessarily notice right away if you change your deductible, but if they catch on they will add force-placed insurance, also known as collateral protection insurance, as a part of your monthly payments. You would potentially lose more money if you don't maintain the insurance requirements of your lender by paying for additional coverage you don't need.
If you have any questions, feel free to ask.
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