What to know about your insurance when your car is repossessed.

If your car has been repossessed, you probably have a lot of questions.  One of the things that you may be worrying about is your auto insurance.  For instance, you might wonder if your coverage is still valid and, if so, whether you need to keep your policy.  You might also wonder how having your car repossessed will affect your auto insurance rates in the future.  Here is what you need to know about your car coverage and having your car repossessed.

  • Your Insurance Requirements

Typically, cars are repossessed when you fail to make a scheduled payment to your lender.  If your car has been repossessed by the lender, then your auto insurance policy remains active (unless you have also forgotten to pay your premiums).  While you can choose to cancel your auto policy at the time of repossession, it’s in your best interest to maintain your coverage.  This is because, if you no longer have the car covered on your policy, then your auto lender will apply their own coverage and make you pay for it .  Because your lender’s coverage will likely be more expensive than your own, it’s cheaper to keep your auto policy until the vehicle is sold.

  • Check with Your Insurer

It is important to note that different lenders will have different insurance requirements during the repossession process.  For instance, some lenders will automatically add a repossessed vehicle to their insurance, even if you still have coverage on the car.  In this case, keeping your policy is redundant and will force you to spend unnecessary money.  So, speak to your lender and learn about their repossession protocol before making decisions on your auto insurance.

  • Repossession and Future Insurance

Repossession is a financial issue, not an insurance issue.  Naturally, most drivers assume that repossession will not cause rate increases or make it harder to secure affordable insurance in the future.  Unfortunately, they are mistaken.  While it’s true that the act of repossession does not affect your insurance company, it will devastate your credit score.  Because many auto insurers consider an applicant’s credit score when setting their rates, having a bad credit score will mean higher insurance costs.
This is what you need to know about your auto insurance on a repossessed vehicle.  Do you have additional questions regarding your auto insurance?  If so, then contact the experts at The Schwab Agency in Colleyville, Texas.  We are ready to assist you with all your car coverage needs today.

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