When Banks Buy Insurance for You

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Insurance

Purchasing insurance is a must for many people in places like the U.S. and Canada. When you buy a new vehicle or a new home, many states or provinces require that you purchase some form of insurance. For instance, in the U.S., every state (excluding Florida) requires that people purchase bodily injury liability insurance (BI) when a car is purchased. It’s best to work with an insurance provider to see what your insurance policy covers upon purchasing these forms of protection.

In some cases though, banks can purchase insurance for their customers. Financial institutions such as the Royal Bank of Canada, Scotiabank, the Bank of Montreal, and the National Bank of Canada will purchase different types of insurance. These can include car insurance, home insurance, and even life insurance. What we’ll focus on today is when banks will purchase insurance for you, and why they do so.

Car Insurance

When you purchase a car you add insurance to the vehicle to keep it protected, and covered. Such coverage can help in case you are a victim of a car accident. Even if you are the cause of the accident, car insurance can provide coverage in such circumstances. In other cases comprehensive coverage can help you if your car is the affected by theft, fire, hail, or vandalism. Other car insurance coverage offered in the U.S. can help to also pay for the repair of your car in the case of an accident. If your vehicle is a total loss, then your insurance company can also help with purchasing a new car.

If you receive a loan for your vehicle, your lending bank might also purchase car insurance for your automobile. When you sign a loan contract with a financial institution like a bank, they sometimes require that you get enough insurance to cover your new vehicle. If you don’t do this, or if you don’t get any insurance at all, the contract will give your bank the ability to purchase insurance.

The bank is securing its investment by making sure the vehicle is insured. In two specific cases, this sometimes happens. First, a large financial institution like the National Bank of Canada, or a small hometown bank, might require that you get more than just liability insurance for your car. They’ll want you to have comprehensive and collision insurance. Second, if you allow your insurance to lapse, your lender will purchase an insurance policy to reinstate your insurance on the vehicle. By purchasing insurance from providers like Liberty Mutual, Geico, Nationwide, your lending bank is attempting to have peace of mind that their investment is being taken care of.

Homeowners Insurance

Purchasing a home represents a major life accomplishment for many people. To have a place to call your own is huge. Finding a house where you will raise your family in the years to come is a blessing for many parents. For financially minded entrepreneurs, purchasing a home is a great way to build money over time. To fund the purchase of these houses many people will seek assistance from bank lenders. For instance, many people seek out the best bank in Canada in the hopes of finding mortgage and lending rates that won’t break their pockets. Some of these financial institutions include the Royal Bank of Canada (RBC) Scotiabank, the Laurentian Bank of Canada, the Bank of Montreal, and the National Bank of Canada.

When loans are provided by these lenders, homeowners insurance is often required. As in the case of automobile insurance, if a home insurance policy doesn’t meet the basic coverages needed by the bank, in some cases these lenders will purchase such insurance. Lastly, if a lapse in coverage takes place, the bank will purchase home insurance to have the policy reinstated after giving the homeowner adequate notice.

The goal in each case is to protect the value of the properties on which the bank has provided a loan on. This provides them with a bit of financial protection and less hassle. In some cases, the customer might suffer a penalty for allowing such a lapse to occur. These are the circumstances under which a bank will purchase insurance on your behalf.

Life Insurance

Financial institutions will sometimes purchase life insurance policies. They don’t often do this for financial protection purposes. Life insurance policies offer benefits that aren’t available through the products and businesses of these financial institutions. Having access to such an insurance policy can provide guaranteed growth and tax advantages for lending institutions. These are the main reasons why banks in the U.S. and Canada purchase life insurance.

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About the Author: Micky Aron