What kind of auto insurance options are available when financing a car?
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You should shop and compare insurance options before buying a car or vehicle. You may encounter a variety of insurance and credit protection products when financing a vehicle
Almost all states require insurance when you purchase or lease a car or vehicle. Like shopping for a car, it’s helpful to shop around with multiple providers to get the best deal.
Purchasing auto insurance
If you don’t already have insurance for other risks, consider shopping for automobile insurance before you shop for a car or vehicle. You should compare coverages as well as costs.
If you already have other types of insurance, such as home insurance, your current insurer can tell you what options they offer or how to add any new vehicle to your policy and how much it will cost. However, you should still see how their rates compare to others.
Other kinds of insurance or credit protection products you may encounter or may be offered when financing a vehicle
Force-placed insurance
If you don’t have insurance when purchasing your vehicle or if your insurance lapses, the lender can acquire force-placed insurance to cover the vehicle if anything were to happen. Keep in mind, this coverage protects the lender and vehicle, but not you.
Vendor’s Single Interest (VSI) insurance
VSI insurance protects the lender if your vehicle is damaged or destroyed. The cost of the insurance may be passed on to you in the overall cost of your loan or may appear as a separately itemized charge. Check to see if this can be waived or canceled later by getting your own insurance.
GAP insurance
GAP is an optional add-on product that promises to cover some or all of the difference between a car’s cash value and the remaining balance on your loan or lease (for example, when the car’s value is below your loan balance) if the car is stolen or totaled.
Credit insurance
Credit insurance is an optional product that ensures your auto loan payments continue if you die, lose your job, or become disabled.
Know what is negotiable
Did you know that you can negotiate the terms of your auto loan? Negotiating can save you hundreds or even thousands of dollars over the life of your loan.