Many unemployed individuals are finding it difficult to maintain their car payments, and as a result, may be facing repossession of their vehicle. Unfortunately, some of these people think that their car insurance will help them avoid repossession, and therefore pay their car insurance premium first, before paying their actual loan. Here is a short overview about car insurance and vehicle repossession.
1 - Car Insurance Does Not Protect You Against Repossession:
No one is going to pay your car loan but you. Car insurance does not protect you against vehicle repossession. This is a matter solely between you and the finance company handling your auto loan. While your car insurance premium may be high, it doesn't insure you against missing auto loan payments. If you miss your payments, you must negotiate a deal with your auto loan company, not the car insurance company. The auto loan company does not want to repossess your vehicle, they want to be paid. They will lose money if they repossess your car, so it is in their best interest and yours, to work out a payment plan that is agreeable to both parties.
2 -Should I Cancel My Car Insurance if My Car is Repossessed?
This depends on your specific situation. If you feel your car was unfairly repossessed or wrongfully repossessed, and you have legal recourse or the financial means to get the vehicle back, then do not cancel your car insurance immediately. You do not want to cancel your car insurance because the vehicle could be damaged during repossession. Actually, it is quite common. While car insurance will not cover your auto loans, the insurance will pay for any damage done to your vehicle by the repo man. Many vehicles receive damage to the body, transmission or brakes. If this happens, your car insurance company will cover the damages, if you have Full or Comprehensive coverage. If you simply have Liability coverage, then the damage will not be covered. If your car is repossessed and you have no means of ever getting it back, then yes, cancel your car insurance immediately. You may be able to get a small refund depending on your car insurance company.
3- Will repossession affect my car insurance rates?
If you have a vehicle repossessed, your car insurance rates will likely rise. Not on the car that was repossessed of course, but on your next vehicle. Why? Because car insurance rates are based on risk. Part of this risk includes your credit history. If you have a car repossessed your credit history will be adversely affected and your credit score will drop. Therefore you will pay more for car insurance on your next vehicle. However, you can find cheap car insurance online by comparison shopping. Online car insurance provides quality coverage at a fraction of the cost.