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Generally, I do all of my quotes online instead of dealing with an agent. They've always asked if the car is leased, financed, or owned. In my current situation I am technically financing the car, but the loan is unsecured. This means that the title doesn't have a lien on it.

So do I technically "own" or "finance" this car?

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    I don't get it. If you crash the car, isn't somebody going to need to be paid off to settle the loan? Or do you intend to continue the loan and payments if you crash it? – Harper - Reinstate Monica Jun 21 at 3:01
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    @Harper If you own a car, it's entirely up to you if you insure it against your own damage liabilities. (Insuring yourself against damage caused to third parties is a different matter, of course). In the UK, that's the basic difference between "comprehensive", "3rd party, fire, and theft", and "3rd party only" insurance policies - though "3rd party only" policies are normally only taken out by people who can't get anything else because of convictions for serious motoring offences, and they are often more expensive as a result. – alephzero Jun 21 at 11:29
  • @alephzero that doesn't seem to answer my questions. – Harper - Reinstate Monica Jun 21 at 13:40
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    Be careful, if you are dealing with a loan agent, you must also report your unsecured loan commitments. Unless your loan is from relatives/friends than a financial institution. – mootmoot Jun 21 at 14:01
  • @mootmoot He's dealing with an "insurance" agent, and they only care if it is secured as they must not pay out the OP in the case of a total loss. – mckenzm Jun 24 at 0:05
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If the loan is unsecured, then you own the car.

If the loan was secured on the car, and you lost, sold or destroyed the car, you would have to repay the loan. Since it's not, you get to keep the debt until you pay it off, regardless of whether you still have the car or not.

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    Exactly. The OP did not finance the car. The OP got a loan (not related to the car in terms of security) and used the money to buy the car. Unless other collateral was put up, what guarantees the loan is basically the OP's credibility. – TomTom Jun 21 at 9:14
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You own the car.

The insurance company wants to know: leased, financed, or owned; so they know if they have to inform the "lender" that you have insurance, and let the lender know the amount of insurance. The lender wants to know that their collateral is being protected. The insurance company may need to contact the lender if you make a claim so that the lender knows that the car was damaged and repaired.

If the car isn't collateral, then your decision to insure the vehicle is up to you, though you still have to follow your state law regarding the other parts of auto insurance and amounts of coverage for things like liability.

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This is about signaling.

A secured lender requires you carry insurance to protect them. The insurance company is asking who they are, to signal them that you do have insurance. And if you lapse, to signal to them that you do not, so they can take action.

Also, if totaled, the insurer can pay off the lender directly. (Consumers often can't be trusted to do this, not least they are desperate for a replacement car.)

Since you supposedly bought this on an unsecured line of credit, the bank doesn't even realize you bought a car with it. They would be quite surprised to hear from the insurer and wouldn't know what to do with the information.

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    The bank probably does realize you bought a car with the money, but doesn't really care, especially if you pay it back. They would still be surprised to hear from the insurer, and wouldn't know what to do with the information (or worse, some confused clerk would wind up making the car collateral on what was supposed to have been an unsecured loan). – WBT Jun 21 at 20:10
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You don't tell them. In fact if you do, they may assume the loan is secured and charge you extra for their effort, usually $50 to $100 a year.

(Not even if the loan is secured by other means, a guarantor, say).

In the event of a total loss, their duty of care may be to pay the true owner of the car, for the loss of their security, and the OP their equity (if any).

Some jursidictions have stamp duty on this extra fee, and there may even be a formal register of the security that is maintained, so clerical work all around.

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