Lien Holder Repercussions for Lapse in Coverage: Reader Question

I had a lapse of insurance coverage because I stored my car away for the winter. My lien holder contacted me, noting that there was a lapse in coverage and that I needed to have full coverage right away. Less than a month later I was able to add full coverage back. Will there be any repercussions from the lien holder because of the lapse in coverage? Phonalie L., USA

Thank you for your question.

The only circumstance in which we could foresee any repercussions would be if the car had sustained some sort of damage during the lapse in coverage. Even then, only if the lien holder took possession of the vehicle (repossession in the event of non-payment)would there be an issue.

In the event of repossession, the lien holder would have the right to pursue a claim against your insurance company. If it was found that the damage to the car occurred during the lapse in coverage, the lien holder would then expect you to pay for any necessary repairs out of your own wallet.

If there is no damage to the car, and no potential claim, then there should be no repercussions from the lien holder.

All this said, since the lien holder is actually an owner of your car until you have paid it off in full, the company does have the right to tell you to have full coverage so that their interests are protected.

This article is written for informational purposes and is not intended to take the place of competent local legal counsel.

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