Loss payee, additional insured, comprehensive and collision minimums, and the documents most lenders expect.
When a lender finances a vehicle, the loan agreement typically requires the borrower to maintain physical damage coverage on the car until the loan is paid in full. This usually means both comprehensive and collision coverage, plus the lender listed as a loss payee on the declarations page.
Loss payee designation gives the lender the right to be named on any insurance claim check for damage to the vehicle. Additional insured language, where applicable, can also extend certain liability protections to the lender. Both designations are administrative and do not change the borrower's coverage limits or deductible choices.
Most lenders also specify a maximum deductible, request electronic proof of insurance on a recurring basis, and require notification if the policy lapses or is cancelled. Failure to keep the required coverage in place can trigger force-placed insurance arranged by the lender, which is typically more expensive and protects only the lender's interest, not the borrower's.
