Financial Counseling Certification Program (FiCEP) Practice Exam

True or False: Full coverage automobile insurance is a secondary product that can be added to a vehicle loan for emergencies.

1. True

2. False

3. Only for high-value vehicles

4. This is standard practice

The correct answer is: False

Full coverage automobile insurance is typically a standard requirement for most vehicle loans rather than a secondary product that can be added for emergencies. It generally encompasses both liability insurance, which is mandated by law, and comprehensive and collision coverage, which protects the borrower’s investment in the vehicle. Lenders often require borrowers to maintain full coverage insurance during the life of the loan to ensure that their interest in the vehicle is protected. The idea that it could be viewed as a secondary product misrepresents how it's utilized in the context of financing a vehicle. It's essential for securing a loan rather than an optional add-on. This coverage is intended to mitigate the financial risks associated with accidents, theft, or damage. Since you cannot purchase a vehicle without insuring it adequately to protect the lender's investment, the assertion that it's merely a secondary product does not hold true.