If you finance a car for someone can they insure it in their own name?

Answer 1

Yes of course, they are required to insure it in their name if they are buying the vehicle by financed note. The buyer is the new owner of the vehicle. All drivers are required to maintain financial Responsibility when operating a vehicle on public roads. The financiers interest is typically covered also by requiring the buyer list them as a lienholder on the policy. This requirement is generally built into the finance agreement

There are also separate business insurance product lines that will cover a lienholders interest in a financed vehicle. The financier trying to insure the vehicle on a standard personal auto policy is an attempt to circumvent the insurance laws and constitutes insurance fraud by failing to disclose the true nature of the the risk to the insurer.

Under finance law, the buyer is the legal owner of the vehicle even theough the note is not paid off with certain encumbrances denoted in the finance agreement. The financier is a lienholder in due course until such time as the finance note has been satisfied.