Everything You Need to Know About Lienholders and Insurance

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Are you currently financing your car? While it may yours according to your auto insurance coverage, you may not actually own your vehicle outright. You may have noticed what’s called a lienholder placed on the title of your car, which means that the lender is actually the owner until you pay off the loan on that car. However, it’s not as simple as that, and there’s more to lienholders and auto insurance than just what you see on paper.

Understanding Lienholders

You may be thrown off by the above paragraph about your car title and the names you’re spotting on your paperwork. So what is a lienholder? It’s the person or party financing your car. Your lienholder must be listed on your car insurance policy, so you must obtain their account numbers, mailing address, and phone number before contacting your insurer and putting them on your auto insurance plan.

Be sure to also make your insurer aware of any requirements for this lienholder. This could result in your insurance coverage being altered to add certain extensions. With a lien, you might want to buy collision and comprehensive coverage on your car. An insurance lien usually means that drivers are forced to purchase additional insurance as required by the bank or other financial institutions. This is often the case for anyone purchasing a new car directly from the dealership. Car insurance companies must make the lienholders aware of the changes to your current title to assure that all parties are protected for liability’s sake.

Impact on Auto Insurance

If you have a loan on your car, the insurance company will make the claim check out to both you as the policyholder and to the lienholder. Since the lienholder continues to have an interest in that vehicle, this is done to ensure that the money is being spent to repair damages. When the policyholder receives the claim check, they will need to get the lienholder to sign off in order to get the cash and have it directed to your mechanic. If the car is a total loss, the insurance company will write the check for the vehicle’s ACV, or actual cash value, minus the deductible on your policy. That check is sent to you for a signature. You must then forward it to the lender to pay off the loan on the vehicle.

When purchasing car insurance coverage, it is important to understand the steps to submitting a claim. If a crash is the other driver’s fault, their insurance company is on the hook for the expenses. This is known as a third-party claim. You are the third party between the at-fault driver and their insurer. That company has no obligation to pay anyone other than you, so the settlement check should be made out to you and you alone. This is even if the case if a financial institution is a lienholder on the car.

Lienholders and Other Insurance Plans

Lienholders can also play a factor in your health insurance coverage. In some parts of the United States, hospitals are entitled to file a lien for repayment on treatment or caring for an injured person following an accident. Some medical providers may ask you to sign a lien letter, stating that you submit through your health insurer against your settlement to pay for medical service.

The lien must be filed with your proper personal information and dates of service. The hospital must also comply with statutes, otherwise, it renders their lien for an emergency room visit or other services null and void. It’s possible to get the lienholder to accept less than the amount paid.


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