Can your car be repossessed if you don't have insurance?

Answer 1

Insurance is there to protect you while you drive. Your loan from the bank lets you keep the car. Although, most banks require you to have insurance before lending you money in the first place.

If you wanted to know whether your car can be taken away just for not having insurance, then no it can't. Just pay the bills and it is yours. You just can't drive without insurance.

Answer

Yes. Part of the security agreement you signed when the bank gave you a loan says that you will keep liability, collision, and comprehensive insurance on the collateral. This is to protect the BANK's interest as well as your own financial protection. If you are in an accident, they want the collateral to be repaired or paid for and do not want to be sued for the other driver's injuries. If your insurance is terminated, the insurance company will notify the lienholder and they will repossess the car.

Repossessed. Yes. If the loan requires that the car be insured (almost always to protect the banks investment) it can be repossessed for no coverage. Repossession does not take your responsibility away from the loan on the vehicle. You are charged for fees such as towing, the auction sale loss (what you owe on the car after it is auctioned) They are never sent back to the dealer and resold. They are used cars and must be auctioned. The average "left over" on a repossessed vehicle (1-3 years old) is about $6000 that you are still responsible to pay.

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Although they CAN repossess your automobile, usually they don't - they don't want the hassle of repoing the car, selling it, and paying all the service fees, then having to try to collect their money from you.

What I have noticed repeatedly is that if you don't have insurance on the automobile, the bank/credit union/finance company will take out insurance for you. If you read the fine print on the loan agreement, there usually is a clause in there that allows them to do this.

When they do, the insurance is usually the state minimum required liability and UIM insurance, and maximum comp/collision - they want to protect their investment.

The premiums for the insurance coverage are tacked onto the loan - either the payments increase, or the term of the loan is extended to cover the insurance payments.

Considering that there are so many cut-rate insurance companies out there, you don't want the loan holder to obtain insurance for you, unless you have NO other options.