New Car Insurance Grace Period
So you’ve decided to purchase a new car and realized you need insurance to complete the transaction. There are a few things to consider when purchasing an insurance policy for your new ride before you drive it off the lot.
First off, do you already have an insurance policy? Second, are you paying cash or financing the vehicle through a lender, such as a bank, credit union or perhaps a leasing company? If you already have an insurance policy the process can be pretty simple, but there are two important issues regarding insurance coverage for a new car.
The first is whether you are simply replacing your current vehicle with a new one (including leased vehicles) or adding an additional vehicle to your policy. The second pertains to the difference between liability and physical damage coverage.
If you purchase a new vehicle to replace the car you originally insured, you are covered, regardless of whether you notify your independent insurance agent or insurance company, through the end of the policy term. In either case, the insurance company is only insuring a single vehicle.
If your new car is an additional vehicle to the one (or more) already listed on your insurance policy, you are typically automatically covered for 14 days without the need to notify your agent or insurance company.
Of course, your insurance company will want to know about the additional vehicle(s), because it means they will have more exposure to paying potential claims and will likely increase your insurance premium.
It’s also important to note the distinction between liability-only insurance and physical damage coverage as it relates to the purchase of a new car. Liability is automatically covered on a new vehicle in the situation discussed above. Physical damage coverage, on the other hand, has some limitations.
If you don’t already have physical damage coverage (perhaps you had an older car you didn’t mind getting banged up), your vehicle may be covered automatically for as many as four days.
If you already have physical damage coverage, your vehicle will be covered equal to the highest amount of coverage on your current policy.
Check with your agent or insurer to verify the amount of coverage before driving off the lot. There will be an automatic deductible assigned to the policy if this is the case.
As always, be sure to gather online quotes to make sure you’re getting the best coverage at the lowest possible rate.