Does Lien Insurance Exist?

Not in the way you probably typically think about different types of insurance policies. But here's an example of how a lien may be tied to insurance. If you finance a car, the bank or other financial institution may file a car insurance lien, forcing you to carry enough comprehensive insurance to protect the financial institution's investment.

Couple reading insurance information

What Is a Lien, Anyway?

A lien is a legal claim on a property that allows the lienholder to take possession of the property if certain conditions aren't met—if the money for that property isn't paid, for instance. Houses and cars are types of property that often have liens placed against them.

Although many people associate surety bonds with the construction industry, they're often required by other industries. Before contacting a surety provider, make sure you're familiar with all federal, state, or local regulations for your industry.

Liens are often placed on property automatically, as a condition of purchase. If you buy a home, for instance, the mortgage lender will file a lien on the property until the mortgage is paid off. Similarly, lending companies file liens when someone finances a car purchase. The company actually owns the car until it's paid off, so they file a lien on it to ensure that the car owner pays off the balance. When the car is paid off, the lien is removed.

Liens are also filed when someone can't—or doesn't—pay a debt. One example would be a contractor placing a lien on a home if a customer won't pay for work that's been completed. Filing a lien is a red-tape intensive, time-consuming process, so it's typically done as a last resort to recover money that's owed.

In the contractor example, the contractor would file a lien on the homeowner's property. The lien would be for the amount owed plus interest, and would be due when the homeowner refinanced or sold the home.

The government also files liens, called tax liens, in the event of an outstanding tax obligation.

Who can file a lien?

Anyone who's owed money can file a lien, but it's a demanding process. For instance, filing a property lien typically involves filing a suit in small-claims court, getting a certified copy of the judgment, and then filing a judgment with the county.

Avoiding a Lien

A tax lien filed against you can have a strong negative impact on your credit rating. To avoid this, make sure you have enough money to keep your obligations manageable. And to keep your finances in order, Allstate Bank offers multiple financial planning options, including budgeting and cashflow expertise.

Talk to Us About How Liens May Affect Your Car Insurance

Your Allstate agent can offer expert advice and guidance about the relationship between your car insurance and your financing company's lien.

Drivers who switch to Allstate save money on auto insurance-safe drivers can save up to 45% or more-and they also get more protection. , In fact, we offer more than 30 different homeowners insurance and .*

Get a no-obligation quote or talk to an Allstate agent at 1-800-ALLSTATE (800-255-7828) to find out more.

Published: August 2011

Allstate Insurance Company, Allstate Indemnity Company, Allstate Fire and Casualty Insurance Company, Allstate Property and Casualty Insurance Company, Northbrook, IL. ©2011 Allstate Insurance Company.

The availability, qualifications and amounts of these discounts may vary from state to state. In addition, terms, conditions and exclusions not described above may apply, and total savings may vary depending on the coverages purchased. In some states, we may offer discounts that are not listed here. For more information regarding your eligibility for these savings opportunities, please contact your Allstate agent.

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