If you plan to buy a new car, know that you’ll have to budget for more than a car payment. You’ll also have to get insurance on your new vehicle—and not just the minimum amount. Can you have just liability insurance on a financed car? The answer is no—you’ll need more than that. While liability insurance is all you need to meet your state’s requirements, the lender of an auto loan will require full coverage. Read on to learn more about insurance requirements for financed cars.

How Much Insurance Do I Need?

The financing company will require you to have full coverage so they can protect the vehicle if you default. Full coverage includes the following types of insurances:
  • Liability. This pays for damages and medical expenses if you cause an accident.
  • Collision. This pays for damage to your vehicle, regardless of fault.
  • Comprehensive. This covers damage by anything other than a collision, such as fire, weather, and vandalism. It also covers theft.
However, you will want to make sure you are fully complying with the lender requirements. While these are the only three types of insurance you must get, you can opt for more. Gap insurance, roadside assistance, and rental reimbursement are other good coverages to have. Is full coverage required on financed cars for the life of the loan? Yes, this should be detailed in the contract. If you don’t, this is considered a breach of contract, and the lender could take the vehicle back or force you to pay the remainder of the loan in full. Now that you know whether or not you can have liability insurance on a financed car, you can ensure you are fully covered and don’t get into any legal trouble.