Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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If you get an auto loan then does the auto insurance policy that you purchase has to be in the same name as the loan? In a word – yes.

If you still have a loan on your car, your auto insurance policy must be in the same name as the car loan. This shows the lender or lien holder that the person who took out the loan is being responsible to protect the vehicle.

The loan company or bank knows that if you are in an accident without insurance and you owe money on the vehicle, they probably won’t see the money that is owed to them.

To learn one must have a car insurance policy in the same name as the auto loan then read on. When you complete the article be sure to enter your zip code into the free tool on this page to compare free auto insurance rates!

Lien Holders Insurance Indemnity Clause

The official name for the requirement that the car loan name and auto insurance policy holder’s name be the same is called the Lien Holder’s Insurance Indemnity Clause. This clause not only requires that the names match but that a full coverage policy is purchased.

This means that you have comprehensive coverage from the insurance company in order to protect your vehicle and your loan.

A comprehensive or full coverage policy is just as its name sounds. It gives the driver and the lien holder full financial protection in the case of an accident or damage. The only requirement is that the policy holder pays the monthly premium on time and that in the case of an accident or damage, the deductible is paid in full. Being late on a payment can forfeit your right to have the accident or damage covered.

The higher the deductible amount you choose, the lower your monthly premium will be. When you submit a claim to your insurance company, they will ask you to pay the deductible before they fulfill your claim. If you don’t have the deductible, the insurance company will not pay, so it is important to choose a deductible that you can afford or to set the money aside before an accident occurs.

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Full coverage protects you no matter who caused the accident or damage. It covers accidents, natural disasters such as hail damage, a tree falling, or other weather related issues, theft, and vandalism. Having this type of protection when you still owe money on your vehicle protects the lien holder as well. If your vehicle is totaled, you will get money from the insurance company to replace it and continue making payments to your lien holder.

If you do not get full coverage in the same name that is on the loan, or if you choose to drive without any coverage, you will be violating the terms of your loan and that will put you in default when the lien holder finds out. You can be put into default even if your payments have been made on time and you haven’t had any accidents, as just driving without the proper coverage goes against the terms of your financial contract with the lien holder.

Once you are in default, the lien holder can repossess your vehicle, turn you over to a collection agency that will demand the entire amount, or in some states garnish your wages to try and collect what you owe on the vehicle. This is why it is so important to follow the terms of your contract including getting a policy in the same name as the car loan.

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Getting the Right Auto Insurance Policy

The best way to ensure that you have all your bases covered when it comes to auto insurance is to get a full coverage policy in your name that includes all drivers that will be driving the vehicle. This includes yourself, your spouse, your children, and anyone else who will regularly drive the vehicle. This way no matter who is involved in the accident or in possession of the car when damage is caused, you and your loan will be covered.

It is your job to get a policy that matches the terms of your loan and is in the right name. Though insurance companies will advise you concerning the laws and requirements of your particular state, they will not know the terms of your specific loan or the name on the loan. It is your responsibility to protect your finances by getting the right policy.

When looking for the right policy, you will come across many companies with many different options and it can be overwhelming. But one way to cut your choices down to size is to use an online car insurance comparison tool. This tool shows you rates and quotes from several top companies side by side so you can find the company that is right for you and your driving needs. Enter your zip to start now!