Buying new car switching insurance from one car
- When to get insurance on a new car
- Insurance when buying a new car
- Know your auto insurance options
- How to insure your new car
- Buying a second car?
- Bringing your new car home
- Read more…
- Be sure to get new car insurance first
- You don't have to wait until renewal
- Car insurance cancellation fee and other costs
- How to cancel your old auto insurance
In most states, car dealerships won’t allow you to drive off the lot before you show proof of car insurance for your new vehicle. And for good reason -- car insurance is required in nearly all states. Also, no dealer wants to be blamed if you total your new car five miles down the road and wind up making payments on a car you no longer can drive.
When to get insurance on a new car
If you already have car insurance for your current vehicle, then your existing policy may offer temporary coverage for your new car for a limited time. If you’re not certain if your policy extends coverage, give your agent a quick call to check before picking up your new vehicle.
If your current car insurance policy does automatically extend coverage to a new car, you won’t be required to inform your auto insurance company before buying a car, but don't wait too long after your purchase to notify your insurer.
Policies that extend coverage to new cars typically give you anywhere from seven to 30 days to inform your car insurance company that you purchased a new vehicle. It's important that you know exactly how long you have and inform your insurer about your new car within this grace period. Otherwise, you could unknowingly end up driving without insurance.
Be sure to find out if your extended coverage includes collision and comprehensive. If it doesn't, your finance or leasing company will require you to add these physical damage coverages to your new car policy immediately.
If you don't have a policy already in place, get car insurance quotes while you're still shopping for a car and make sure you compare insurance rates by car model. You don't want to be in the middle of purchasing your new vehicle and discover you can't afford the insurance on it.
Insurance when buying a new car
Some car insurance policies only cover a new vehicle if it’s replacing a vehicle on your policy and only extend the same coverage. For instance, if you only had liability insurance for your old car, your new car will only have liability coverage. If you find this to be the case, call and add the new car to your policy while at the dealership to have collision and comprehensive coverage in place before you drive off the lot.
Other auto insurance companies’ policy terms automatically provide a new car with comprehensive and collision for only a few days, two to four is common, if all the vehicles on your policy have liability only coverage.
That limited coverage window allows you to get home and call the insurer, which is especially helpful if you’re buying a car during the weekend and your agent isn’t available for you to add your new vehicle to your policy.
Other auto policies extend the physical damage coverage for a longer period of time if you have these coverages on at least one of the other cars on your policy.
Rules are all over the place with car insurance companies, and can also vary according to state laws. For instance, in Texas, insurance companies must give a newly obtained vehicle the same amount of coverage as your car with the most coverage. That means if you have one car with collision and comprehensive and a second car with liability and then you add a third car, it will have collision and comprehensive extended to it.
But, in Texas, if you’re replacing a car on your policy you’re extended only the same coverage as the car the new car is replacing. And any new automatic coverage in Texas only lasts up to 30 days so during that time you must inform your insurer of the new car and decide what exact coverages you want on it.
Whatever your extension period is, if you wait past the deadline to notify your insurance company you will lose coverage on the new vehicle. This could get you in trouble with your state department of motor vehicles and your finance company, not to mention bring about major financial difficulties if you get in an accident.
Know your auto insurance options
If you're buying your first car, you need to shop around and get a car insurance policy lined up before you buy your new auto. That usually means you’ll need to call from the dealership to formally start the policy by providing the insurer the vehicle identification number.
If you're already insured and the dealer asks to see proof of insurance before you can burn rubber, show your current insurance card if you know there is automatic coverage. The dealer should accept that as proof. If you’re asked to provide something more, most car insurance providers can email or fax proof.
Keep in mind if you're leasing a vehicle you may need to upgrade your coverage -- leasing companies require you carry higher liability limits. Typically, your insurer can get you the coverage you need within 24 hours.
If it's time to shop for auto insurance, Insure.com provides a list of the best car insurance companies as ranked by policyholders.
Annual car insurance cover is a simple concept, but what if you decide to replace your car during the middle of your insurance policy?
If you’ve never replaced your car before, the process may seem confusing — do you transfer your existing cover to your new car or take out a new policy? Our guide outlines your options and can help you get the best deals on car insurance.
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How to insure your new car
The important thing to know is that you MUST inform your insurer when you buy a new car — even if you have several months left on your policy it will not automatically cover your new vehicle. If you don’t tell your insurer you’re driving a different car you won’t be covered in the case of an accident, and you won’t be driving legally as your cover is not valid.
Once you have chosen your new car and have committed to buy it, you should call your insurer to change your policy. Bear in mind that your premium could go up or down, depending on the type of car you are buying and its value. For example if you currently have a small runaround and buy a powerful sports car or a 4×4 with a large engine, your insurer is likely to hike the cost to meet the added risk and expense of your new vehicle.
Your insurer may also charge an administration fee to make changes to your car insurance policy, usually costing from £15-£45. Once the change has been confirmed with your insurer, you should be covered to drive your new car immediately.
The alternative is to shop around to see if you can get a better deal by cancelling your current insurance policy. Your insurer is likely to ask for a cancellation fee of around £50, but you should be able to get a refund for any unused cover (or your upcoming payments will be written off if you pay monthly). However, it’s important to check your policy documents carefully before cancelling, as some insurers will only offer a partial refund.
Despite the cancellation costs, you might be able to save if you can find a cheap enough insurance policy for your new car. Start by shopping around on a comparison site like uSwitch, then see if your lowest quote would be more affordable once you’ve factored in your cancellation fee and any loss on your premium — it’s an extra bit of effort but you might be surprised at how much you could save by switching this way.
Buying a second car?
If you’re buying a second (or third, fourth, or fifth) car, you’ll have to have an insurance policy for each vehicle. Contact your current insurer to see if they offer special ‘multi-car’ policies or discounts, or take out a new policy — just make sure you shop around for the best price.
Even if you take out a separate insurance policy for your additional car, you must inform all insurers you hold policies with that you have a new vehicle — the insurer will base your premium on how many cars are in the household and may even reduce your premium based on the fact you may be driving the original car less.
Bringing your new car home
In all the excitement of buying a new car, don’t forget that you won’t necessarily be covered to drive your car to its new home.
If you’re buying a new car from a dealer it’s likely they will include a temporary car insurance policy in the sale. This will cover you for up to seven days until you have arranged your own policy.
If you buy a second hand car you will need to take out your new insurance policy (or amend your existing policy) before you can drive the car home. Don’t be tempted to drive the car home without adequate cover — it’s not just the risk of a crash you have to think about, you’re actually driving illegally if you don’t have insurance.
Alternatively, you may have minimal insurance cover to drive the vehicle home if you have ‘driving other cars’ permission on your current insurance policy. Check your policy carefully to see if this is included. Bear in mind that this will give you the minimum amount of cover to drive legally (third party), but if you get into an accident on the way home your insurer won’t pay out for any damage to your new car.
If you’ve just bought a new car or are on the lookout for a new vehicle, compare car insurance prices with uSwitch below:
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Be sure to get new car insurance first
Always have a new policy in place before canceling your old auto insurance coverage. You don't want to have a lapse in car insurance for even one day. You would not be covered for any accident that might occur, and your old company may report your expired policy to the state, which may penalize you. Your new company will be able to time the onset of your new policy to coincide with the cancellation of your old coverage.
You don't have to wait until renewal
All standard auto insurance policies give you the right to cancel your policy at any time, once proper notice is given to the insurance company. You don't need to wait until renewal. If you choose to cancel in the middle of a cycle, the company will prorate your latest premium payment up to the cancellation date and return the remainder to you.
Some states have laws that prevent a cancellation during the first month or 60 days (to keep drivers from buying a policy to meet registration or license requirements and then quickly cancelling). But there are exceptions:
- You can show proof that you obtained another car insurance policy with a different insurer, or
- You no longer own the vehicle that you insured on the policy
Car insurance cancellation fee and other costs
Unfortunately, some car insurance companies may charge a special "short rate" cancellation penalty if you cancel in the middle of a policy term, so be sure to ask before you switch. If they do charge a penalty (it's often 10 percent of the unspent premium amount), you'll need to decide if the better rate outweighs the fee you'll pay.
Insurance companies advertise that you'll save 15 or even 20 percent by changing to them, but you may also lose your current insurance company's loyalty discounts, which can be as high as 25 percent. There are also other auto insurance discounts, including bundling policies, earned accident forgiveness, future renewal discounts, and other benefits that grow with or depend on the amount of time you maintain a policy with that car insurance company.
On the plus side, many car insurance companies also offer a "transfer discount" or new-customer discount, typically 5 percent, to help offset these costs, but you'll want to weigh what the change will mean to your car insurance's cost.
How to cancel your old auto insurance
Generally, you need to cancel your auto insurance policy in writing. Send a letter to the company's customer service address with the following information:
- Your name, printed or typed
- Your full address
- A request to cancel your policy, giving the policy number and effective date of cancellation.
- A reason for the cancellation, such as "I have bought a new policy" or "I have sold the insured vehicle."
- The name of your new insurance carrier and the policy number.
- Your signature
- Date of signature
Here is a downloadable cancellation form you can print and send to your old insurance company.
If you have a local agent through a company, such as State Farm or Farmers, you may be able to call and cancel. If you have a policy through an online insurer, such as Geico or Progressive, you may be able to cancel through the company’s online policy management system. The company may ask for information about your new car insurance policy.
Your prior carrier may want a copy of the declarations page from your new policy.
If you've sold a car, you may be asked to provide a bill of sale.
Most states' insurance laws actually require the company to confirm that you have a new policy for your car before cancelling your old policy. The reason is that most insurance companies have to report policies that are cancelled to the state insurance department, so the state can keep track of uninsured drivers. This helps reduce the number of uninsured drivers. If they let you cancel your old policy without proof that you had a new policy, they'd have to report you as uninsured.