Finance

How does insurance tie in with finance? You can finance the purchase of anything from a vehicle, your house, equipment, machinery or recreational vehicle. Some financing requires proof of insurance. If the item you have financed is not insured then if something goes wrong you will have to pay to repair or replace.

To finance a vehicle is to promise to pay for the vehicle. This does not have to be a new car. Be careful if you are buying a used car as sometimes the interest rates can be quite high. Do your homework.

Financing fees are included in a contract drawn up showing the price of the vehicle and the amount to be paid including finance charges. A lien is usually recorded against the vehicle to protect the interest of the person/company providing the financing.

Insurance is usually required to protect the financial interest of the company providing the funds. This is in case of damage or loss to the vehicle. The usual required minimum amount is $1 million Public Liability and Property Damage (PLPD), $1000 deductible Collision and $500 deductible Comprehensive. The name and address of the lienholder is shown on the policy documents. When you are purchasing your vehicle the dealership will usually request proof of this coverage. Often disability insurance and life insurance will be offered in conjunction with this financing.

What happens if you pay too much for a vehicle? The vehicle is stolen and now the insurance pays out based on the actual value of the vehicle. You don't have enough money to pay off the financing. This then becomes your personal debt. So buyer beware when financing a vehicle. If you purchase a new vehicle be sure to talk to your broker about the SEF 43R endorsement for replacement.

When you are financing your home it is done with a mortgage. Again, your lawyer will require proof of coverage on the property and that the mortgagor is shown on the insurance. Your insurance agent or broker will prepare a document called a "binder" and this will be used by the lawyer to set up the title change that is necessary to complete the sale.

Farmers will often finance equipment as will contractors, manufacturers and other forms of business. Even if there is not a requirement to provide insurance coverage it is relatively inexpensive compared to the cost of replacement in case of a claim. When a combine is over $100,000 or a large piece of equipment in a processing plant is hundreds of thousands of dollars it just does not make sense to not have insurance.

Talk to your agent or broker to be sure that you have addressed your needs for insuring necessary equipment or machinery. You should also discuss the option of equipment breakdown insurance.

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