When you borrow money to buy a vehicle some lenders may insist that their interest on the car insurance policy is noted simple because they stand to lose if something happens to the automobile, which is collateral for the loan. So, would the carrier need to inform them of any changes to the coverage?
The whole point of noting an interest is that they are kept informed of modifications and claims. Therefore the vehicle insurer would inform them of any material changes like dropping Collision and Comprehensive or letting the policy lapse for whatever reason. Usually they would know the changes within 7 – 10 days. So, you cannot get away with doing anything that they will not be happy about for long.
If you dropped any coverage that was contractually required they would probably contact you and ask to re-instate it. If you don’t, they may go ahead and force place automobile insurance, which would normally be more expensive and you would have to pay for it anyway. If things get worse, they may even try to repossess the automobile for settling the debt.
The worse part of force placed coverage is that they don’t need to include liability in this arrangement since they are only interested in securing the vehicle. So, the problems can get pretty serious when you start driving around without a third party protection and hugely worrying if you end up in an accident.
On the other hand, they may not be interested in small changes and anything related to your personal circumstances like yearly mileage, home address and maybe adding another driver to the policy. If a financial adviser arranged the loan, you can probably ask them questions and it would not reach to the company. Besides, what is the harm in talking to them directly if they would find out anyway?
If the size of the debt has been reduced considerably they may be open to negotiations and letting some of the coverage go. For example, if there is very little chance of the auto loan being upside down anymore they may let you drop Gap coverage or increase the deductibles so that you can save money.
Another options is to pay the loan off if it is at all possible and if their auto insurance requirements are costly and burdensome. There is no need to put up with high rates. Furthermore, paying of an auto loan can save you in two ways. It reduces the premium expenditure and you don’t pay interest anymore. Actually, it could improve credit score and allow you to get even better rates in the market.
Insurance is a very valuable facility that enables the execution of many essential contracts in our lives. Can you imagine a mortgage company lending you thousands of dollars on a house knowing that it could go up in smokes anytime if they don’t have the comfort of knowing that there is another company they can fall back onto for their losses? So, it is normal that they would be concerned about the well being of any policy they depend on.