Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insuran...

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 23, 2020

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Key takeaways...

  • Auto loan payments and insurance payments are two separate obligations
  • Comprehensive and collision insurance are vital for drivers whose auto loans have not been fully paid off
  • Comparison shopping for the best total insurance policy is recommended

Paying cash for a new or used car would seemingly make things easier for a great many consumers. Doling out $5,000 for a used car means the title is turned over to the consumer. Monthly payments are not required and interest is eliminated.

Most people, however, cannot pay cash for the total price of a vehicle.

Financing a car becomes a reasonable alternative.

Persons with good credit may end up receiving excellent interest rates. Even those with bad credit could be approved without much trouble.

New borrowers might be unfamiliar with what car financing covers. A vehicle does need to be insured. Questions may arise regarding whether or not car financing also includes payments for all-important car insurance. The short answer is “no.”

If you recently financed a car and need auto insurance, compare at least three to four policies to find the best rates for you! Enter your ZIP code above to begin!

What Car Financing Entails

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Car financing refers to the process of acquiring a loan to purchase a car. The payments made to the lender cover the costs of the car.

Auto insurance is not weaved into the payments.

The borrower needs to purchase auto insurance on their own to satisfy the requirements of applicable state law and to protect the investment made in the car.

Without insurance, all the financial burdens associated with being liable for an accident rest on the shoulders of the borrower/driver. Keeping up with loan and insurance payments end up being critical responsibilities.

Even though the financing service does not include insurance payments into the debt, this does not mean more convenient options don’t exist.

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Payment Consolidation Services

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Dealing with several different bills per month comes with the necessary responsibilities of making timely payments on obligations.

Payment consolidation services exist to serve those who would prefer a more streamlined approach to paying obligations.

For a nominal fee, one payment per month can be put towards a payment consolidation service. The service then issues smaller payments to various entities the client is indebted.

A car payment and insurance payments could be combined into one fee paid to the service managing the separate payments to the lender and the insurance provider — which makes life a lot more convenient.

Convenience is not the only thing an auto loan borrower must think about. Protecting the investment in the vehicle is highly necessary.

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No Escape from the Loan

Someone who borrows $18,000 for a new car is obligated to repay the loan. If the car ends up being stolen or totaled, the debt needs to be repaid. The lender does not forgive the obligation on loan simply because a car was totaled.

Liability insurance, the common coverage found in basic policies, won’t cover losses to a vehicle under a number of circumstances.

This is not to diminish the value of liability insurance. Liability insurance does more than just cover the costs of the few bills. Yes, liability insurance on an automobile will pay for any damage an at-fault driver inflicts on another car or any property.

Being responsible for $2,000 may be the least of your worries upon causing an accident. Depending on the seriousness of an accident, a driver could be liable for well over $100,000 in damages. A wrongful death suit could bring forth even greater losses.

Other types of coverage should not be ignored just because they might not be mandatory in a particular state. Comprehensive, collision and uninsured motorist coverage would definitely aid in a number of accident or other scenarios.

Collision, Comprehensive, GAP Insurance, and Car Loans


Collision covers losses to a vehicle when the owner of the vehicle is at fault. Liability insurance protects against financial losses upon causing harm to others and their property. Collision protects against accident-based losses that harm oneself.

A driver who totals their car without collision insurance is forced to pay back a car loan on a car that is scrap metal.

Comprehensive covers all manner of other losses not related to an accident. Theft and vandalism would be covered.

If a thief steals a car and the car is gone forever, the auto loan borrower is still on the proverbial “hook” for the loan if they do not possess the proper amount of insurance.

GAP insurance is also vital to purchase. GAP insurance covers any differences between an insurance payment and what is owed on the car.

Going back to the $18,000 loan, a car could be destroyed in an accident, and the insurance company may pay out $14,000 on the value of the car. The problem is the debt owed on the vehicle is $15,500. GAP insurance would cover the remaining $1,500.

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Accessing the Right Insurance

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Anyone who owes on a car loan needs to purchase the best possible insurance to protect against losses. Comparison shopping is the best way to locate the best policy.

Defining “the best” policy is not exactly uniform. Different buyers are going to be interested in accessing policies that are vital to their needs.

When the financing company still owns the title, those “needs” include avoiding being obligated to make full payment on a totaled vehicle. A great insurance policy could cut down on the financial losses associated with an unexpected calamity.

If you need to cut down on auto insurance rates after financing a car, start comparison shopping today by entering your ZIP code below!