We hope that you never have to deal with your vehicle being repossessed, as it’s a stressful experience no one should have to face. Unfortunately, repossession does sometimes happen, and it can bring with it questions about how other things related to your vehicle might be affected. Most notably, you might quest what happens to your auto insurance in the event your covered vehicle is repossessed. That’s the question we’re here to answer today, as everyone here at Glover Family Independent Insurance simply wants to help you make the most informed decisions you can when it comes to your insurance policies.
How Auto Insurance Is Affected by Repossession
Let’s backtrack a bit first — what exactly does it mean for a vehicle to be repossessed? This is an important thing to know, for anyone who might not, before diving into the rest of this information. If you purchased a vehicle through a creditor or made a lease agreement with the dealership, they have the right to repossess your vehicle if you default on the payments you agreed to make or violate some other term of your agreement.
It’s important to note that your insurance policy does not immediately cancel if a lender repossesses your vehicle. In fact, if you established your insurance policy through your lender, they may keep the policy active while they hold the vehicle. Alternatively, if you purchased your insurance independently, your insurer might automatically cancel your policy once the repossession is reported, but it’s important to check in with them as you shouldn’t assume it’s been done for you. If you still owe insurance payments for the period before repossession, you’ll likely still be responsible for making those payments; however, you could qualify for a partial refund on prepaid premiums if your insurer cancels your policy early.
Are You Still Required to Carry Insurance After Repossession?
Since you no longer have a vehicle, you aren’t technically required to carry automotive insurance anymore, but there is one special circumstance you’ll certainly want to consider. Generally speaking, the lender will still expect insurance to cover the vehicle until such a time as they have been able to resell the vehicle. If you let your insurance lapse to save yourself from making those payments, your lender might apply forced-placed insurance to maintain coverage until the next sale, and you’ll likely be charged for this insurance. It’s possible that this policy will be more expensive than your existing policy, which is why we always recommend keeping your policy until everything regarding the vehicle is completely settled.
Avoiding Repossession-Related Insurance Issues
It’s incredibly important to stay on top of things when dealing with a repossession, so that you don’t complicate your financial situation even further than it has already been. You should start by getting in touch with your insurance provider as soon as you can to confirm whether or not your policy will be canceled automatically, to determine if you qualify for a refund on any prepaid premiums and to prevent unnecessary future charges.
You should discuss continuous coverage with your provider, either for the previously discussed situation where your lender still requires coverage or because you plan on replacing the repossessed vehicle sooner than later. Doing so will prevent any gaps in your coverage, which can actually lead to higher premiums upon purchasing a new policy when you eventually need it. You can discuss lower-cost coverage options with them, including non-owner car insurance.
Need Help Navigating Your Auto Insurance After Repossession?
Repossession can be a dark time in your life, but it’s no reason to panic or shut down completely. You can come back from anything, and we’re here to help in any way that we can. We’d be happy to help you review your current policy and determine next steps, find affordable insurance options to maintain coverage, or help you plan for future auto insurance needs after your repossession. Just get in touch with us right here at Glover Family Independent Insurance and we’ll help however we can.