Getting Insurance After a Repossession

A vehicle repossession can significantly impact your auto insurance options and rates. While obtaining coverage may be more challenging and expensive, it's still possible to secure the protection you need. Enter your zip code below for a free quote and see how much you can save by switching to A-MAX!

If your vehicle has been repossessed by your leasing or finance company, you will pay much higher premiums than you would without a repossession on your record. However, you are still eligible to purchase car insurance.

What is a Vehicle Repossession?

A car is repossessed when a leasing or finance company takes possession of your car due to missed car payments on your loan or lack of auto insurance. Typically, this process starts once your payments are delinquent for over 90 days. Repossession is a severe consequence of not managing your car loan and insurance responsibilities. If the bank offers you the option to make the missed payment and pay penalties they are also looking to collect; you may be able to recover your vehicle. If not, your lender will sell your car at auction. If the car is sold for less than what you owe on the balance of the loan or lease, you will be responsible for paying the difference. To avoid your car being reclaimed by your lender, prioritize timely payments and maintain adequate insurance coverage on the car.

What Happens to My Insurance After My Vehicle is Repossessed?

If your car is repossessed, your auto insurance coverage must remain effective until your bank can re-sell the vehicle. It’s essential to maintain coverage to avoid additional penalties and fees. If you do not maintain active insurance on the car, the lender may obtain insurance on its own for the car and pass the cost of it onto you, which may be more expensive than if you maintained insurance on the vehicle yourself. Insurance companies typically don’t require a claim after your car is reclaimed by a bank, as it’s a financial issue rather than a liability issue. Still, you should inform your insurer about the repossession to avoid any potential issues.

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Getting Insurance After Repossession

You can still get car insurance after you have had a vehicle repossessed, but it may be more challenging and expensive. Be prepared to provide detailed information about the situation leading up to your lender taking back your vehicle and your financial situation. Shop around and compare rates from different insurance companies to find the best option. Consider working with an insurance broker who specializes in high-risk cases. You can get a quote for car insurance by speaking with an independent insurance agent, directly with an insurance company, or you can use an online rating tool such as A-MAX Insurance to compare coverage and pricing from multiple insurance companies.

Managing the Impact on Future Insurance Rates

Because repossession is a financial issue, not a liability issue, there isn't a way for an insurer to hold the situation against you when you apply for a new auto insurance policy. However, when your vehicle is repossessed, it can heavily impact your credit score, which insurers consider when determining risk factors and premiums. Your payment history for things like loans and credit cards accounts for 35% of your credit history, so having your vehicle reclaimed by a bank will greatly impact your score. As a result, you will face higher insurance premiums. Improving your credit score and maintaining a clean driving record can help mitigate the impact on future rates. Consider taking steps to improve your credit score, such as making timely payments and reducing debt. As you improve your score, you should shop around for new auto insurance to ensure that you are getting the best rates for your current situation.

Insurance After Your Vehicle Repossession FAQs

Q: Should I cancel my auto insurance after my vehicle is repossessed?

A: No. You are responsible for maintaining auto insurance on your vehicle even after your lender takes possession of it and until the bank can re-sell it. If you do not have the car insured, your lender will purchase coverage on the car for you, which can be substantially more expensive than if you secured a policy on your own, and you will be expected to pay the additional cost.

Q: Will my car insurance be more expensive after I have had my vehicle repossessed?

A: If your car is reclaimed by a bank, your credit score will drop substantially. Because insurers use your credit score as a rating factor to determine your car insurance rates, you will pay more for your auto insurance after you have had a vehicle repossessed.