Wondering, if automobile financing affect automobile insurance? Buying a automobile on loan is the simplest and the most common solution to purchase a automobile nowadays. But can this decision impact your automobile insurance rates and make it costlier for you? Let’s discover on this blog.
Buying and owning a automobile isn’t any longer a dream. Financing options or automobile loans have made this dream turn right into a reality for most individuals within the country. Automotive purchase is now so simple as buying some other expensive commodity, due to the straightforward and hassle-free option of automobile finance, offered by quite a few banks and other financial institutions in India.
Nonetheless, there’s one query that the majority automobile buyers are unsure of while deciding to take automobile loans. Will this alternative to avail automobile financing affect automobile insurance that they buy after purchasing the automobile? Also, would automobile financing make automobile insurance policy costlier? Is it perhaps a greater idea to go for automobile purchase by making a single downpayment as an alternative?
Does Automotive Finance Affect Automotive Insurance Plans?
The reply simply is yes and no. Let’s start with the excellent news first. No because availing automobile finance facility doesn’t change the premium rate of your automobile insurance policy. Nonetheless (and this answers the yes a part of the query), automobile financing does change the coverage requirements of your policy. Let’s understand this in additional detail below.
What Does Automotive Finance Alter in Your Automotive Insurance Policy?
As mentioned above, taking a automobile loan wouldn’t change the premium amount payable to the insurance company as a part of your auto insurance policy. Nonetheless, your automobile finance company (or bank) would require you to increase the coverage of your plan since the lender also becomes a co-owner of the automobile on this case. Hence, it’d naturally want all risks to be covered so far as the vehicle is worried. Let’s take a look at a number of the ways financing a automobile brings changes in your vehicle insurance policy:
- Full coverage required: Because the bank or the lender is loaning a big amount of cash to enable you finance a automobile, it’d need to play it protected from all angles. Subsequently, as a part of the automobile insurance plan that you simply purchase, your lender would want you to go for not only comprehensive coverage but in addition collision cover. This is usually required over and above the third-party liability basic insurance plan. Through this, the bank/lending financial institution intends to guard itself against any monetary loss incurred with regard to the automobile. Also, in case of any damage to the vehicle, all expenses are to be borned by the insurance company, whether the damage was brought on by the owner (self) or by a 3rd party (third-party liability).
- Whole-year coverage: One other requirement mandated under automobile financing is whole-year cost coverage for the vehicle, whatever the time period for which the automobile was utilized by the owner. For example, you might go on a visit abroad and park your automobile within the garage for 3 months. On this case, your insurer would still need you to pay for insurance cover for the complete 1 12 months.
- Financer as Payee: When the automobile financing company lends you a specified amount to buy a automobile, it can also need to assume the role of a payee or additional insured within the automobile insurance plan. It’s because for the reason that lender has paid the quantity to purchase the automobile, it’d expect to receive the advantages of any cost coverage provided by the insurance company in case of any damage to the vehicle.
- Penalty for lapse of policy: If you’ve got bought a automobile under automobile financing option, it becomes extremely necessary to deal with paying your premiums without fail, to stop lapse of insurance. It’s because your lender can also be the payee or additional insured under the plan. It will bring the lender bad repute if the insurance policy lapses. Hence, the financier may penalize you by asking you to repay the complete loan amount, increasing your EMIs, and even taking possession of the vehicle.
- Higher premium in case of recent or late-model vehicles: Although the automobile insurance premium rates don’t change much in case of automobile financing, there could also be an exception to this rule in case of financing recent or late-model cars. The dearer or more advanced the vehicle (technology-wise), the upper the premium rate for the automobile.
How Does a Automotive Finance Calculator Help?
It’s at all times advisable to make use of an internet automobile finance calculator before going to a bank to avail automobile loan. The automobile finance calculator helps you identify the precise amount of EMIs you would want to pay the bank once you’re taking a automobile loan. As well as, it could also help compute the quantity it is best to borrow, the speed of interest on the loan amount, and the EMIs payable throughout the tenure of the loan.
This is able to enable you evaluate where exactly you stand when it comes to taking automobile finance and repaying it and you possibly can then select automobile financing as per your specific needs and financial stature.
Wrapping it Up
We understand that automobile financing not necessarily affect automobile insurance but alters the coverage requirements under the plan. We also learned that this happens since the lender can also be the payee or the extra insured on this case and would want the vehicle to be covered against all risks at any cost.
It’s due to this fact really helpful to decide on the very best automobile insurance policy in India that gives comprehensive and collision coverage for the vehicle as required by the automobile financing company. Also, it’s at all times a great idea to go for a automobile insurance policy online since the complete process might be smooth and hassle-free. Most insurance firms offer online automobile insurance facilities to their policyholders.