Many complications can arise when you buy car insurance. If there is a second party involved on the title, it will worsen the situation a bit. Many policy holders who have a lien against their car feel the burden that they can not make their own decisions about their car insurance or that they are not truly responsible for what happens to their car because they don't own the same. To overcome these sorts of problems you should analyze who and what are external factors that affect your policy. Two important questions to be answered are: what is a lien and what is a Lien holder? A lien is a claim on your car as security for the payment of a debt. This means if you fail to pay your debt, whoever has placed the lien (the lien holder) can take possession of your car.
A lien can be placed on your car either by choice or by external force. By choice is when you lease a car or when you are borrowing money. You are voluntarily making an agreement with someone else and agreeing to pay that person, and by using your car as a security promising that you will pay. It is important to understand that if you don't pay, the holder can come in and reclaim your car. A lien placed on a car by force is usually the result of the government - particularly the IRS. If you owe the government money, they will often place liens on your home or against your car until you pay all dues and taxes to the government. Depending on your state laws, a lien can be collected whenever you sell your car, or the car itself can be forcibly taken after a period of time.
Rights of a Lien Holder
1. Lien Holder has all the rights to get paid first, out of insurance checks or insurance payments or sale proceeds
For example, if your car sells for $6,000 and your lien is valued at $4,000, you will only get $2,000 from the sale of the car. Your holder gets paid first. If the car sells for $6,000 and the lien is valued at $7,000, then you get nothing from the sale of your car, and you still have to pay the lien holder $1,000.
2. The insurance rate is determined at the discertion of the Lien Holder
In cases of voluntary liens, such as leasing, a policy holder is required to purchase the car insurance is usually what the lien holder dictates. This could often be over and above the standard damage and collision coverage. This is done with the intention of retaining the lien for a longer duration. In most cases, the auto insurers give special names for these kinds of additional policies, such as Loss Payee Clauses, or Lien holder Clauses.
3. Responsibility of meeting deductible vests with the auto insurance policy holder
The policy holder has to remember that he has to pay the deductible; even if he is involved in a minor accident, the lien holder has no responsibility. Only the policy owner is required to pay the deductible in full.