Why am I being charged extra money for not meeting my lender’s insurance requirements?

The bank that gave me my car loan is charging me over $700 because, according to them, the auto insurance I had for the first six months of the loan didn't meet their insurance requirements. Why is this happening? The bank didn't even tell me about their insurance requirements when they gave me the loan.

Answer
Because a lienholder has an insurable interest in a vehicle, they also have minimum coverage limits that must be maintained on the car. The minimum coverage requirements should be stated in your loan documents. In addition, the loan officer or finance professional at the bank should have gone over the coverage requirements at the time that the loan was originated.
If they discover that a vehicle has no coverage, or that the coverage does not meet their minimum limits, they will purchase coverage to ensure that their interest in the vehicle is protected. This type of coverage is generally more expensive than the coverage you would acquire on your own. It appears that the cost of this coverage is now being passed on to you.
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Shannon Martin
Answered on Mar 12, 2021
Shannon is an expert in personal lines liability insurance with 13 + years of insurance industry experience. She also served as a special insurance liaison to AARP members for 6 of those years. She is a graduate of UL Lafayette and currently resides in NY with her family. Shannon is also an amateur juggler, ukulele player, and is a time travel paradox theory enthusiast.
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