If I have comprehensive and collision insurance through my dealership, am I still legal?

My insurance canceled on a vehicle I am financing so the dealership added coverage for my car in case it is damaged. Now I just make my car payment and it includes comprehensive and collision. Why do I need a new insurance policy if I already have it with the dealership?

Jul 17, 2017 Warren, MI

Neil Richardson

Jul 17, 2017

Even though car insurance is required by the state and also by your lender, the state and your lender require two different types of coverage. Your lender wants you to have insurance to make sure the vehicle will be fixed or paid for if it is damaged or totaled while you're paying off the auto loan; this is called comprehensive and collision coverage. The state requires that you have insurance to cover damage or injury you cause to yourself or other drivers in the event of a crash. Michigan is a No-Fault state so you are required to carry liability insurance and PIP coverage on your policy in addition to coverage required by your dealership. The coverage you have through the dealership does not meet the state's insurance requirement because it does not include the legally required coverage. This type of policy normally only covers your remaining loan balance and would not provide any additional benefit to you if you owed less on your loan than the value of your car like a regular auto policy. Your best bet to find the lowest rate is to shop with as many companies as possible.

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