How does the lienholder know if my policy has full coverage or not?

"Can I remove full coverage since there isn't much left owed to the bank? My car payment only has about six months left to it. This policy renewal I would like to remove full coverage from my policy to save money. How would they know if I did?"

Answer
“Congratulations! It must feel great to be so close to having your car paid off!
Your lienholder will be notified once the coverage is removed. If you look at your declarations page, you will see that the bank is listed under ‘loss payee.’ Any time you make a change to the comprehensive coverage, collision coverage, or if the policy is canceled, your insurance carrier will send them a letter advising of the update.
In most cases, when full coverage is removed, the bank will send you a letter letting you know that you have about 30-45 days to put the coverage back on the policy. If this isn’t corrected, they will start charging you for their insurance. It would be tacked on to your loan payments.
Since you have such a small balance left, it would be best to give your bank a call. They may give you permission to remove the coverages early.”
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Shannon Martin
Answered on Jul 28, 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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