"Forced Insurance" on a bank loan.....?



96 DX Hatch

Alex
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#1
I went to the dealer with my g/f's dad, and he wanted to trade his '05 Nissan Quest for an '03 Cadillac Escalade.

But when they came back with the numbers, they said he owed more now than when he bought the van because the bank has put a $3-4k forced insurance thing on his loan for some reason and now the only way to go through with the deal without talking to the bank, is by dropping $9k down instead of $0.


My question is, what is this "forced insurance"? And how can he get this thing straightened out so he can go through with the deal (like just transfer the F/I [lol] to new loan for the Caddi)
 


Eran

It's on ass-backwards.
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#2
Forced insurance is, per what I've heard, basically full coverage insurance that has been billed to the car loan instead of the person. This usually happens when insurance coverage lapses on a vehicle that you are making payments on.
 

$lick Rick

TEOTWAWKI
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#3
Eran said:
Forced insurance is, per what I've heard, basically full coverage insurance that has been billed to the car loan instead of the person. This usually happens when insurance coverage lapses on a vehicle that you are making payments on.

you heard wrong.. to an extent


it is forced onto the loan because the persons insurance has lapsed = true

full coverage insurance = way way way false



it's lenders liability insurance, meaning if you wreck the car and dont have insurance, then the bank gets repaid.
you're still on the hook for any and all damage to persons and or property you have done, and the law does not recognize it as insurance, meaning if you get pulled over, and have a cop with half of a brain, you will get a ticket and possibly have your car impounded for driving w/out insurance

it's usually between a $2,000 and $4,000 lump sum added onto your principal balance on the loan

For a financed car, generally, the borrower is required by the bank to provide adequate security in the form of insurance coverage on the property used as collateral for the loan. Your agreement with the bank/lienholder determines whether or not it is necessary to put the bank/lienholder on the policy. If you do not insure the car, the lienholder may buy special insurance and add the cost to your loan. This is called forced placed insurance. The cost of this insurance is typically higher than you would pay if you bought your own policy through a standard carrier. Also, forced placed insurance does not provide liability coverage on your behalf.
 


$lick Rick

TEOTWAWKI
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#4
96 DX Hatch said:
I went to the dealer with my g/f's dad, and he wanted to trade his '05 Nissan Quest for an '03 Cadillac Escalade.

But when they came back with the numbers, they said he owed more now than when he bought the van because the bank has put a $3-4k forced insurance thing on his loan for some reason and now the only way to go through with the deal without talking to the bank, is by dropping $9k down instead of $0.


My question is, what is this "forced insurance"? And how can he get this thing straightened out so he can go through with the deal (like just transfer the F/I [lol] to new loan for the Caddi)

he'll need to either call, or better yet visit the bank where his current loan is through
if his insurance never lapsed then he can fight the addition to the loan
if he did let his insurance lapse, then he's S.O.L. unless the bank decides to be really nice
his 3rd option is to let the car go repo... but that's called "butternosing" in the industry and could ruin his credit pretty much forever

even if they added $4,000 to his loan, it would not constitute a $9,000 down payment unless he also has negative equity on his vehicle

no, you cannot "roll" the insurance balance onto his new car, but since the amount added to his balance was figured off of the combined monthly payments to cover their insurance for the remainder of the loan... +interest, he might be able to talk them into dropping the remaining coverage, and they would have to apply for a refund at whichever institution they added the policy through


the other side is that possibly the dealership he is trying to buy the caddy from simply paid too much for the caddy.. it is a common occurance with dealerships, they might need to pay more money for a trade in, in order to make the numbers work on the car they are trying to buy.
and even after the deal is made, the value shown for the vehicle to the customer and the ACV (actual cash value) are usually completely different numbers. the higher the acv on the trade in, the more proffitable the original deal is, but the harder it will be to make any money on the trade without a significan down payment
 

$lick Rick

TEOTWAWKI
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#6
the whole concept behind the insurance pretty much pisses me off.... but the lenders gotta protect their investments i guess
 

Eran

It's on ass-backwards.
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#7
$lick Rick said:
the whole concept behind the insurance pretty much pisses me off.... but the lenders gotta protect their investments i guess
Yeah, it is pretty rediculous. Especially since the reason forced is so expensive is there is no shopping for insurance. They just make a call and say "hey, make it happen."


$$$$$$$$$$$$$$$$$$$$$$$$$$

:???:
 

LowNotSlow

Aqua Teen Christmas Force
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#8
I pay 8 bucks a month to ensure that my car loan is paid off pending a total wreck. Not 4 grand.
 

Eran

It's on ass-backwards.
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#9
LowNotSlow said:
I pay 8 bucks a month to ensure that my car loan is paid off pending a total wreck. Not 4 grand.
That's not the same thing. You're paying insurance to make your car payments go away. What we're talking about is forced insurance, so that if your insurance lapses, and you wreck the car, the dealership doesn't have to pay the car off.
 

LowNotSlow

Aqua Teen Christmas Force
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#10
oic. that sucks. Shouldn't have let the insurance lapse in the first place I guess.
 

96greencivic

#1 in the Atlantic!
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#11
Wow, I've never heard of forced insurance issued by the dealer. Isn't that something that would be disclosed at incepttion?
 

anfrey

OG スバリスト
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#12
wait wait.. so this ISN'T gap insurance?
 

$lick Rick

TEOTWAWKI
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#13
96greencivic said:
Wow, I've never heard of forced insurance issued by the dealer. Isn't that something that would be disclosed at incepttion?

it's not issued by the dealer, it's issued by the lender... and yes, it's in the fine print and perfectly legal



and no anfrey, this is NOT gap insurance
as a matter of fact, if the vehicle is totalled and the forced insurance deems they'll pay less than you owe on the car, then YOU are on the hook for the balance
gap insurance is what would cover the gap between the insurances' payout and the balance owed ont the loan
 

anfrey

OG スバリスト
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#14
ahhh i see.. thanks for clearing that up todd
 

96greencivic

#1 in the Atlantic!
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#15
Thanks for the clarification, but I can't think of a circumstance where a buyer would be forced to pay that kind of insurance beyond what they typically have.
 

$lick Rick

TEOTWAWKI
Registered VIP
Registered OG
5+ Year Member
10+ Year Member
#16
96greencivic said:
Thanks for the clarification, but I can't think of a circumstance where a buyer would be forced to pay that kind of insurance beyond what they typically have.

there's only a few circumstances in which a lender will add this onto your loan
1) your insurance policy lapses for a period of time
2) your insurance doesn't have the propper leinholder listed and you do not get it fixed for an extended period of time
3) your current policy provides insufficient coverage, many leinholders require a minimum level of coverage, usually full coverage with $500 to $1000 deductables for both comp and collision

I love this phone, I can reply from anywhere :lol:
 




VigLink badge