We have a customer that was recently hit by a vehicle with force-placed insurance. What is force placed insurance?
Forced insurance means that the finance company takes out insurance on the car, to protect their asset which you are failing to do by not keeping the mandated insurance on it. The cost of this insurance is then passed onto you, usually in the form of an added charge on your loan or lease payment. The cost of forced insurance is typically high and with no real benefit to you.
Loan or lease documents usually state that if you do not obtain or keep the appropriate insurance coverage on the vehicle that they, the lien holder, will secure such coverages and charge you for it. When the financial place gets insurance for you, these charges are subject to interest and the premiums will be higher than if you purchased the insurance yourself. This forced insurance typically provides protection to the bank or other financial institute, not you, for their interest in the car.
To be clear, in most cases, this insurance coverage that they force place only protects the lender and does not protect you for your interest in the vehicle. In addition, it does not protect you against Liability for damage or injury you cause to another person or automobile, thus not fulfilling state requirements for insurance leaving you still showing a lapse with your state and thus opening yourself up to uninsured motorist penalties.
Loan or lease documents usually state that if you do not obtain or keep the appropriate insurance coverage on the vehicle that they, the lien holder, will secure such coverages and charge you for it. When the financial place gets insurance for you, these charges are subject to interest and the premiums will be higher than if you purchased the insurance yourself. This forced insurance typically provides protection to the bank or other financial institute, not you, for their interest in the car.
To be clear, in most cases, this insurance coverage that they force place only protects the lender and does not protect you for your interest in the vehicle. In addition, it does not protect you against Liability for damage or injury you cause to another person or automobile, thus not fulfilling state requirements for insurance leaving you still showing a lapse with your state and thus opening yourself up to uninsured motorist penalties.
So our customer has to file a claim on their own policy, pay the deductible... the other driver thought insurance is insurance. Force placed insurance is usually very expensive as well. Yikes!