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Wondering, if car financing affect car insurance? Buying a car on loan is the easiest and the commonest way to purchase a car these days. But can this decision impact your car insurance rates and make it costlier for you? Let’s find out in this blog.
Buying and owning a car is no longer a dream. Financing options or car loans have made this dream turn into a reality for most people in the country. Car purchase is now as simple as buying any other expensive commodity, thanks to the easy and hassle-free option of car finance, offered by a number of banks and other financial institutions in India.
However, there is one question that most car buyers are unsure of while deciding to take car loans. Will this choice to avail car financing affect car insurance that they buy after purchasing the car? Also, would car financing make car insurance plans costlier? Is it perhaps a better idea to go for car purchase by making a single downpayment instead?
To put all these questions to rest, we discuss here how car financing is related to a car insurance policy. Read on.
The answer simply is yes and no. Let’s start with the good news first. No because availing car finance facility does not change the premium rate of your car insurance policy. However (and this answers the yes part of the question), car financing does change the coverage requirements of your policy. Let’s understand this in more detail below.
As mentioned above, taking a car loan would not change the premium amount payable to the insurance company as part of your auto insurance policy. However, your car finance company (or bank) would require you to extend the coverage of your plan because the lender also becomes a co-owner of the car in this case. Hence, it’d naturally want all risks to be covered as far as the vehicle is concerned. Let’s look at some of the ways financing a car brings changes in your vehicle insurance policy:
It is always advisable to use an online car finance calculator before going to a bank to avail car loan. The car finance calculator helps you determine the exact amount of EMIs you would need to pay the bank once you take a car loan. In addition, it would also help compute the amount you should borrow, the rate of interest on the loan amount, and the EMIs payable throughout the tenure of the loan.
This would help you evaluate where exactly you stand in terms of taking car finance and repaying it and you can then choose car financing as per your specific needs and financial stature.
Wrapping it Up
We understand that car financing not necessarily affect car insurance but alters the coverage requirements under the plan. We also learned that this happens because the lender is also the payee or the additional insured in this case and would want the vehicle to be covered against all risks at any cost.
It is therefore recommended to choose the best car insurance policy in India that provides comprehensive and collision coverage for the vehicle as required by the car financing company. Also, it is always a good idea to go for a car insurance policy online since the entire process can be smooth and hassle-free. Most insurance companies offer online car insurance facilities to their policyholders.
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PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
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