One question often asked is whether an auto insurance policy has to be in the same name as that of the car loan. The simple answer to that is “Yes!”.

The official name for the need to have the car loan name and the auto insurance policy holder’s name the same is the Lien Holder’s Insurance Indemnity Clause. This clause insists that the names match and that the auto insurance is a full coverage policy (also called a comprehensive policy). This means that you must have comprehensive coverage from the insurance company so that your vehicle and your loan are both protected.

Terms of The Lien Holder’s Insurance Indemnity Clause

The Lien Holder’s Insurance Indemnity Clause means the driver and the lien holder have full financial protection in the case of any damage or accident to the car. The policy holder must pay the monthly premium on time as being late may forfeit your right to vehicle coverage in the event of an accident or damage. Also, in the case of an accident or damage, the deductible must be paid in full. When you submit a claim the insurance company will ask you to pay the deductible before they fulfil your claim, so it is important to choose a deductible that you can afford, or to set the money aside, before an accident occurs. Obviously, the higher the deductible amount you choose, the lower your monthly premium will be.

If you do not get full coverage in the same name as is on the loan, as required by the Lien Holder’s Insurance Indemnity Clause, you will be violating the terms of your loan and you will be in default when the lien holder finds out. You will be in default even if your payments have been made on time and you haven’t had any accidents, as simply driving without the proper cover is against the terms of your contract with the lien holder. Being in default means the lien holder can repossess your vehicle which is why it is very important to follow the terms of your contract, including getting a policy in the same name as the car loan.

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