Auto Lease and Lenders with Auto Loan Finance Company
Regardless of where in the United States you live, if you are leasing a car or a truck or are making payments on a vehicle purchase loan, the leasing company or auto loan or auto lease finance company will include as a contract provision the requirement that they be shown as an insured party on your automobile policy. Your auto lease or loan contract may even specify the minimum coverages you are obligated to maintain (typically collision and comprehensive coverages).
Everyone understands that the fundamental concept of buying insurance is to protect one’s own financial interests. What is not well understood is that our legal relationships with others create obligations to protect their financial interests as well. When we assure that those legal obligations are taken care of, we secure our own financial well-being.
Once this abstract discussion is reduced to everyday terms, the concept does not seem so strange. These are relationships of great importance to individuals and businesses in their everyday lives and activities and one’s insurance decisions are interwoven with these relationships. These relationships can include: mortgage lenders on your home; mortgages trust deed, lenders on your auto loan; lenders on other items, whether as lenders or lessors on contracts for business equipment; and, persons with whom you have contracted to sell goods or to provide goods and services, who require that they be named as additional persons insured under your policies.
The lease or auto loan contracts often give the lessor or lender the right to place coverage to protect their interest in the event of loss (but not your interest) and to charge you for the cost of such coverage. This will happen unless you make sure that your auto liability insurance provides evidence of coverage at each policy renewal.
Usually, notifying your insurer is done at the time the lease or loan documents are signed. Many automobile dealers will not release a vehicle to a customer until the dealers have confirmation that your insurer has been informed of your lease or purchase of a new vehicle. It is often a dealership’s finance department that undertakes this notification, based on information supplied by the customer.
However, it is usually a better practice for you to call your insurance agent and personally provide him or her with the new vehicle purchase or lease information. It is better to take the responsibility to handle the notification yourself and to make sure it is done right.
Even if you do not have all the information needed (such as the correct legal name of the lender or its address), you can at least tell your agent the name of the dealership, its telephone number, and the name of the correct person at the dealership to contact in order to obtain the financing and additional insured information necessary. This will guarantee that the auto leasing company or automobile finance company is properly included as an insured party under your automobile policy.
If you are trading in a vehicle as part of the transaction or if you have sold it in a private party transaction, you will need to call your agent to advise him or her of that change to the policy. Also, if you pay off any outstanding loan balance, then you will need to notify your agent that the prior lender should be deleted from your policy.
When in doubt, more notice to your agent (i.e., both from you and from the auto lender) can never hurt you in auto lease finance. It is only a failure to give notice or complete and accurate information to your agent that can lead to trouble.