Are auto finance companies required to collect proof of auto insurance from clients?
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Are auto finance companies required to collect proof of auto insurance from clients?
I have a van financed through an auto finance. Last august the van was totaled in a flash flood. Turns out my insurance agent only sold me liability insurance that I was unaware of. I thought I had full coverage. If the finance company had asked for proof of insurance this mistake would have been caught. As a major company financing millions of dollars worth of auto loans I would think the company would require proof of proper insurance from clients to protect their financial interests.
Asked on January 31, 2017 under Insurance Law, Illinois
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 7 years ago | Contributor
No, there is no requirement on the financing company to collect proof of insurance--they can, and it is wise for them to do so, but they don't have to. Rather, the law is clear that the burden (and therefore the consequences) are on the driver/insured to make sure that they bought the coverage they wanted and have insurance coverage; for example, you need to review the policy and declarations page to check that you have the insurance you thought you did. If you failed to do this, the consequences of a lack of insurance fall on you.
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