What should I do if my insurance lied about what should I be getting if I use my car as a collateral and got wrecked?

I have a loan with a finance company and my car was collateral. My car was totaled a month after having the loan, my insurance deductible was $2,500 and my car was only valued at $3,000 so the loan company was only sent $500, therefore I still owe $3000 on a secured loan with no collateral. Before getting the loan I asked questions about what would happen if car was wrecked or broke down and they said insurance would cover it and loan would be paid off. The day I signed my paperwork and the lady was reading over everything, she went over (in a very quick confusing manner) all the insurance I had through them and I was under the impression she once again said this insurance here is what will come in if something happens to your car. When my car was totaled I called to let them know what was going on and asked them how the process worked they acted like they had no idea what I was talking about that they had no insurance out on my car. I have a friend that works at a similar loan company and was told by her that it is a law for the lender to take out insurance on cars when they are used as collateral for these exact issues. I am wondering if my friend is confused or if I am being conned by the finance company because of there mistake of not getting insurance on my car. I can't get any answers from them.