Do I Need Fully Comprehensive Insurance If I Have a Car Loan?
When you have a car loan, figuring out what kind of insurance you need can be confusing 🤔
A common question many people have is whether they need to get fully comprehensive insurance for their financed car.
Here, we’ll explore why insurance is important when you have a car loan, and what type of insurance you need 😊
Got a specific question? Why not jump to:
- Is insurance required when taking out a car loan?
- Will I need fully comprehensive insurance when taking out car finance?
- Is insurance more expensive for cars on finance?
Is insurance required when taking out a car loan?
When you take out a car finance loan, insurance is typically a mandatory requirement.
Lenders want to ensure that their investment (in this case, your car) is protected in the event of an accident or theft.
Most financing agreements will specify the minimum level of insurance coverage you need to maintain while you have the loan.
This is to safeguard against the financial loss that could occur if the car is damaged or lost.
As for the specific type of insurance required, it can vary depending on the lender and the terms of your loan agreement.
Typically, lenders will require at least third-party insurance, which covers damage to other vehicles and property in the event of an accident.
However, many lenders may require more comprehensive coverage to protect against a wider range of risks.
Will I need fully comprehensive insurance when taking out car finance?
While it's common for lenders to require comprehensive insurance on a financed car, it's not a universal rule.
Fully comprehensive insurance, often just called 'fully comp', covers not only third-party damages, but also damage to your own car, theft, and other risks.
It's the highest level of cover available and offers the most protection for your vehicle.
Some lenders might insist on it, especially if the car is new or has a higher value. It’s always best to check the specific requirements of your car finance agreement or consult with the lender.
More car finance guides
- What Checks Are Done for Car Finance?
- Can I Get Car Finance If I Don't Yet Have My Licence?
- How to Improve Your Credit Score
- Can I Get Car Finance Without a Credit Check?
Is insurance more expensive for cars on finance?
Insurance for financed cars can sometimes be more expensive than for cars owned outright, primarily due to the level of coverage required.
If your lender insists on fully comprehensive insurance, this will typically cost more than a basic third-party policy.
The increased cost reflects the broader protection offered by comprehensive insurance. It covers repairs or replacement of your car as well as damage to other vehicles.
The cost of insurance will also depend on factors like the car's make and model, your driving history, and where you live.
Insurance premiums are calculated based on risk, so a financed high-value car may be seen as a higher risk, leading to higher premiums.
It’s important to shop around for insurance quotes to find the best deal that meets your lender’s requirements and fits within your budget.
You should also take the cost of insurance into account when working out the total cost of finance.
Apply for car finance with Carmoola
At Carmoola, we understand the importance of affordable car finance that fits your lifestyle and budget.
We offer low-rate hire purchase car finance to suit a wide range of needs, whether you're buying your first car or upgrading to a newer model.
Our aim is to make car finance accessible and stress-free, with clear terms and competitive rates.
Applying for car finance with Carmoola is straightforward, and we work hard to ensure you get a deal that’s right for you.
Ready to get behind the wheel of your dream car? Apply for affordable car finance with Carmoola today 😎 🚘
FAQs About Insurance And Car Finance
Is it better to have fully comprehensive car insurance?
Fully comprehensive car insurance is often recommended, especially for financed cars. It provides extensive coverage including damage to your vehicle, third-party vehicles, theft, and fire. This type of cover offers more protection compared to third-party or third-party, fire and theft policies.
Do you have to insure a financed car?
Yes, you typically need to insure a financed car. Most finance companies require at least third-party insurance, with many insisting on fully comprehensive insurance to protect their investment in case of accidents or theft.
Will my insurance pay off my finance?
If your car is totalled or stolen, standard car insurance usually pays out the current market value of the vehicle. This may not always cover the full amount you owe on your car finance. GAP (Guaranteed Asset Protection) insurance is designed to cover the difference between the insurance payout and the remaining balance on your car loan.
