Reader’s Question:

I have a loan on my vehicle here in Tennessee and I was told that I will be required by the finance company to purchase extra coverage, why is that?

Emil

Knoxville, TN

If you have a loan on your vehicle in Tennessee, the finance company would ask you to purchase extra insurance coverage. For instance, aside from the auto liability insurance, the finance company would ask you to buy collision and comprehensive insurance coverage that would provide coverage for the value of the loan that you have taken, and you would likely be asked to buy Uninsured Motorist coverage for the protection of the car against damage by another motorist who doesn’t have auto insurance or who doesn’t have enough insurance to cover the damage to your car.

The finance company would ask you to buy collision and comprehensive coverage since the required auto liability insurance would only provide coverage to other cars in the event of a car crash but would not provide coverage for the repair or replacement of your car. Collision insurance, as the name entails, would pay for the repair or replacement of your car in case it sustains damage from a crash with another car or with still object like a lamp post, especially if you were believed to be the one responsible for the crash. On the other hand, the comprehensive insurance would pay for any damage to your vehicle that is due to natural causes such as flood or storm.