As a car owner, the last thing you want is third party insurance on your vehicle. Not only is it expensive, but it does not cover all of your financial well being. If you have received notification that third party insurance has been purchased on your vehicle, it is time to get proactive.
Third party insurance is insurance purchased by a lender through a third party. Essentially you the owner have not followed through on your end of the agreement made between you and your lender. Lenders require you to protect the vehicle with full coverage insurance at all times. If you fail to comply, a third party insurance policy can be purchased by your lender in its place.
Who pays for third party insurance?
Even though third party insurance is obtained by your lender, the bill is forwarded to you. Usually, the lender will add it into your payments. If you choose not to pay, you are at risk of having your vehicle repossessed.
Third Party Insurance Cons
Why not just keep the third party insurance?
Third party insurance is essentially only covering the lenders asset, aka your car. Physical damage to the vehicle will be covered, but none of your liability. Having third party insurance does not make it legal for you to drive your vehicle. The cost of third party insurance is typically much more expensive than a traditional insurance policy and provides less coverage.
What if you have an insurance policy and third party insurance was purchased too?
If you have an active insurance policy and have been notified of a third party insurance policy, you need to immediately provide proof of insurance to your lender.
What is the importance of listing your lender as loss payee?
Anytime you place insurance on a vehicle with a loan you should list your lender as loss payee. Listing the lender will make it so the lender receives notification from the insurance company of your coverage. By adding the lender as loss payee as soon as possible, you will cut back on third party insurance being placed on your vehicle in error. Mention your loan to your agent so the lender can be listed properly right from the beginning.
Can you get reimbursed on third party insurance payments?
If you had third party insurance placed on your vehicle at the same time as proper insurance on your own, you ought to be able to get reimbursed on the third party insurance payments. Proof of duplicate coverage will need to be provided to the lender. A declaration page is the best form of proof to provide to your lender.
What is your lender looking for?
Lenders want to be listed as loss payee and or additional insured. They want to see the liability coverage, comprehensive coverage, and collision coverage. Some lenders put further stipulations on the coverage amount. Specific liability limits and maximum deductible amounts can be required.
Never rely on third party insurance for coverage on your vehicle. It is not in your best interest. It is important to have a car insurance policy which fully protects all of your interest. Third party insurance only protects your vehicle against physical damage. No liability or medical coverage will extend to you with third party insurance.
