How does financing affect coverage requirements?

Lenders typically require comprehensive and collision coverage until loan is paid.

When you finance a powersport vehicle, like an ATV or a motorcycle, through a lender or financial institution, they often have specific insurance requirements. This is because the lender retains a financial interest in the vehicle until you've paid off the loan in full. To protect their investment, lenders generally require borrowers to carry both comprehensive and collision insurance coverage. Comprehensive coverage protects against damages not related to collisions, such as theft, fire, or natural disasters, while collision coverage pays for damages resulting from accidents with other vehicles or objects. These coverages must be maintained for the loan's duration to ensure that, regardless of what happens, the lender can recover their funds either through repair or replacement of the vehicle if it is damaged or demolished.

Imagine you decide to buy a brand-new jet ski. You opt to finance it through a bank, meaning you agree to pay off the loan over a few years. The bank holds a lien on the jet ski as you still owe them money. To ensure that the jet ski remains a viable asset until you've paid it off, the bank requires you to maintain comprehensive and collision insurance. This way, if an unexpected event like a storm damages your jet ski, or if you accidentally crash it into a dock, your insurance can cover the repairs or replacement costs. This insurance policy typically cannot be dropped until you’ve fully paid off your loan and the bank's financial interest is removed.

If you're thinking about financing a powersport vehicle, it's wise to budget for the additional cost of comprehensive and collision insurance premiums, as these will be required expenses until the loan is fully paid. Before committing to a loan, check with various insurance providers to compare rates and find the best deal. Remember, maintaining the required coverage not only satisfies lender requirements but also provides you peace of mind, knowing that you are financially protected against potential damages or losses.