Imagine this scenario. You’ve been driving around in the old beater you bought back in high school. But now that you have a full-time good-paying job, you’re ready to trade your first car in for an upgrade.
You settle on a new-t0-you car at the local dealership. You can’t wait to drive it off the lot. After signing about a million papers, you exchange keys with the dealer. The dealer tells you that he’ll let your insurance agent know about the swap.
As you head out the door to your “new” car, you take one last look at your old vehicle – remembering all the fun times you made driving it around. And then you’re off.
“Life couldn’t get better,” you think to yourself. There’s nothing that could spoil this day!
And then, on your way home, the unexpected happens. A few miles from your house, a deer runs out in front of your shiny new wheels.
I know this is an unlikely scene. It doesn’t happen very often that you wreck your new car on your way home from the dealership.
But accidents do happen. And, because of a few common mistakes I’ve seen people make, they don’t always have the insurance they need for their new car.
These folks don’t even know they don’t have the insurance coverage they need in place most of the time.
Now, I’m not trying to scare you, but in the past few months, I’ve had multiple clients who didn’t realize that they were driving out without coverage or enough coverage.
So how does an oversight like this happen?
In this blog post, I explain what you can do to prevent such oversights. By answering three questions I often get from customers when they’re buying a new car, you’ll know what you need to do to make sure you’re coverage is in place!
My clients often ask:
- When should I call my insurance agent if I’m buying a new car?
- Should I let the dealership communicate directly with my insurance agent?
- Does my old policy cover my new vehicle if I wait to call my agent after I get home?
#1 When should I call my insurance agent if I’m buying a new car?
One mistake that people often make when they buy a new car is waiting until after purchasing the car to give their insurance agent a call.
Why is it a good idea to call your agent ahead of time?
Avoiding Car Insurance Sticker Shock
First and foremost, calling your insurance agent ahead of time will let you know if you can expect increases in your new premium amounts.
I’ve had many a customer who came to me after purchasing a new car only to find out that their new policy will cost substantially more than their old policy.
When they bought the new car, they “thought the insurance would be about the same.” And when they realized the insurance was more than they wanted to pay, it was simply too late.
Making Sure Your Coverage Will Match Your New Insurance Needs
While it is true that your new car will have at least liability coverage for thirty days from your current policy, you may not have enough coverage for your new vehicle.
When you buy a new vehicle, your policy limits and the coverages you choose to carry may change. This is especially true if your current policy is liability-only.
I have a friend who at one time purchased a new vehicle and didn’t call ahead of time to let his agent know he needed to add comprehensive and collision to his policy. So, when he drove his new car off the lot, he only had liability coverage in place.
On the way home, he had an accident. His insurance covered the damage he had done to the other car, but he had no coverage for his liability-only vehicle. A costly mistake for sure!
Bottom line: Make it a priority to call your insurance agent before you purchase your new car.
By calling ahead, you can make sure you can afford to pay the insurance on your new vehicle, and you can line up the coverage you need.
#2 Should I let the dealership communicate directly with my insurance agent?
When you buy a car from a dealership, the salesperson you work with will often communicate with your insurance agent about your new vehicle.
When You Buy a Car with a Loan
This is especially true if you are buying a car with a loan. All lenders require that you carry “full coverage” on your new vehicle.
If you are using a lender to buy your car, you won’t be able to drive your car off the lot without guaranteeing you have insurance coverage in place.
Buying a Car with Cash
Problems occur more often when you buy a car outright, and the dealer says they will communicate the details about your new car with your insurance agent.
Car dealers, like the rest of us, have a lot on their plates. They deal with a lot of paperwork, and sometimes things fall through the cracks.
I’ve had a client get their renewal and notice that their new car is not on their policy more than a few times. Confused, they gave me a call.
In these instances, my client found out that the dealership never made the call about their insurance. My client has been driving around without coverage all the weeks and months that they’ve had their new car. Disturbing thought!
Removing Your Trade-In
Finally, if you are trading in your old vehicle, don’t rely on the dealer to communicate that information with your insurance agent. If the dealer forgets to call for some reason, you may be continuing to pay insurance for a vehicle you no longer own.
By calling yourself, you can make sure that your old vehicle is removed from your policy.
If, months after you traded in your old car, you find out that it was never removed from your policy, you can backdate that change. To do so, however, you’ll need documentation outlining when you traded in your vehicle.
Without the documentation, you may not receive the money back that you paid for insurance on the vehicle after you left it with the dealer.
Bottom line: Don’t rely on the car dealership to communicate with your insurance agent about your new car.
If they forget to call your agent, you may not have the coverage you need. If they fail to let your agent know about your trade-in, you may also be paying for coverage you no longer need.
#3 Does my old policy cover my new vehicle if I wait to call my agent after I get home?
This is a great question! Especially if it’s 7 pm when you’re buying your new car. Your agent probably isn’t available to update your policy.
Most insurance companies will give you a day or two to inform your agent about your new vehicle. You have the same amount of coverage that you had with the car listed on your policy during this time.
So, if your old vehicle only had liability coverage, your new car only has liability coverage. If your old vehicle had comprehensive and collision, your new vehicle has comprehensive and collision.
It’s essential to remember that your insurance company will likely give you one or two days to make the necessary changes to your policy. But this is not guaranteed!
Liability Coverage for 30 Days
You can guarantee that your old policy will provide liability coverage for the next 30 days for your new car. This will protect you if you damage someone else’s property, but it won’t give any coverage for your vehicle.
Adding an Extra Car to Your Policy
What happens if you buy an additional car? Will you have coverage if you wait until you get home to call your insurance agent?
In this case, your existing policy will extend to your additional vehicle. So, if your current policy has “full coverage,” your additional car will have “full coverage.” If your existing policy is liability only, your additional vehicle will only have liability coverage as well.
In this scenario, you will need to call your insurance agent a day or two after buying the car. To guarantee coverage, you’ll need to contact your agent and add the vehicle to the policy.
Titling Exceptions
One detail you’ll want to pay close attention to is how your additional vehicle is titled.
If you buy a car for one of your children and have it titled in their name, your insurance company may not recognize the vehicle on your policy.
The insurance company may require a separate policy in your child’s name. A policy for a young driver can be very expensive!
If you plan to add your child’s car to your policy, make sure it is titled with your name first. Most often, the insurance company will add a vehicle titled that way onto your existing policy.
Bottom line: The insurance you carry on your old vehicle will have at least limited coverage for your new car or an additional. It may not, however, have all the coverage you want for the new vehicle.
Also, if you are adding a car for your son or daughter, make sure you know how it should be titled to be added to your insurance policy.
Do you have all the insurance coverage in place that you need?
Auto insurance is not the only area of insurance people often have gaps. Homeowners or life insurance are also areas where individuals may not have enough insurance coverage for what they need.
As with the new car owner at the start of this article, the worst time to find out you don’t have coverage is when you desperately need it!
How can you make sure you have all the insurance coverage you need?
We help our clients make sure they’re fully covered is by performing an insurance review. By examining your current coverages, any changes in your life situation, and reviewing your possessions, our team makes sure that your coverages align with your insurance needs.
If it’s been a while since you called in for an insurance review, I will encourage you not to wait a minute longer. In about fifteen minutes, one of our team members can work with you to quickly assess if you have all the insurance coverage you need.
Or you can fill out the form below so our team can get started on your review right away!
