Is a Lien Holder Required to Provide Insurance?
I reside in Texas and recently was involved in a hit & run not-at-fault auto accident. After some investigating, I discovered the driver did not have insurance on the vehicle. However, it has an existing lienholder which is a finance company. If the driver doesn't carry any auto insurance is it not the responsibility of the lienholder to ensure that the vehicle has coverage even if it has to be provided by the lienholder themselves? If you were involved in a not at fault accident with that vehicle who would payment for damages fall back on?
- Tanya T.
Our Answer: The lienholder has no reason to insure the vehicle. When a person purchases a vehicle with a loan (hence the lienholder), part of the contract with that finance company (lien holder) states that the individual is responsible for purchasing insurance on the vehicle. This absolves the lien holder of liability should the vehicle be involved in an accident. Usually, when a person purchases a new vehicle, the lien holder requires proof of insurance at that time. But if a policy is to lapse, or the person changes insurance companies, the lien holder simply may not be aware that the original insurance no longer exists.
If there is no insurance on the other vehicle, then you would want to go through your own Uninsured Motorist coverage on your own automobile insurance policy. (For an explanation of Uninsured Motorist coverage, please click here.) Don't worry - if the accident was not your fault, this accident should not affect your rates. You are not an increased risk because of it. You are paying your insurance company a premium, so why not have the company work for you?
Once your Uninsured Motorist claim has been paid, then your insurance company will track down the at-fault driver for reimbursement of the money that they paid you, as well as any deductible that you had to pay, if any.
This article was approved for informational purposes only. It does not take the place of competent local legal counsel.
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