Most people are excited to put their first down payment on a car. Then, they see the insurance bill. Many dealerships in Reading, PA require people to obtain full coverage auto insurance before they drive the car off the lot, and there are a few reasons why. 

Your Car is the Collateral

When you get a car on payment, you have to take out a loan for the vehicle. Then, you pay payments on that loan, including interest. The vehicle acts as collateral for that loan. So, if something happens to the vehicle, and you don’t have full coverage, the collateral is gone, and the lender has to take a loss if you don’t keep making payments. Typically, a lender will sue you for the remaining balance because that’s the only way they can recoup their money.

Financial Security

This can also act as financial security for the person with the car. If the car is totaled, you still owe the remaining balance on the loan, even if you no longer have the car. Full coverage insurance policies will usually pay out the amount the car is worth. It may not be enough to cover interest, but this payout can go a long way in paying off your loan. 

Forced Auto Policies

Most lenders write in the contract that you must keep full coverage insurance on the vehicle. If you don’t work with a company like Berks County Insurance to get a policy, they can get one for you. This policy is typically more expensive, and they can tack the cost of the policy onto your car payment or bill, giving them the right to repossess it if you don’t pay it. 

Instead, it’s best to contact one of the experienced agents here at Berks County Insurance to get a policy. We’ll work with you to get you the necessary coverage. Contact us today. We’re currently serving the Reading, PA area.