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Is Car Insurance Transferable to Another Vehicle?

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Reviewed byJoel Ohman
Founder, CFP®

UPDATED: Apr 8, 2020

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Insurance Q&A: “Is car insurance transferable to another vehicle?”

We here at TTAI aren’t exactly sure what’s being asked, so we’ll provide some general information on this topic by the way of a few examples.

Read on if you are asking about a new car purchase or if you want to know what’s covered if you happen to borrow someone else’s car.

Did You Buy a New Car?

When it comes to auto insurance, although every company and state may have slightly varying rules, there’s typically a limited “transfer” of insurance (of sorts) when you buy a new car. But be certain to contact your insurer prior to buying the car to be certain you are covered.

Have you simply replaced a car by getting rid of your previous car or did you add a new car to your existing collection?

Replacement Car

If you bought a new car and sold or traded in your previous vehicle at the same time, you have a predetermined amount of time to notify your insurer of the change. Expect about 7-14 days max, although some insurers may allow quite a bit more time for a replacement vehicle.

During that period, your auto insurance policy will cover the new car even though it is not specifically listed on your policy.

You can expect the same coverage you had on the previous car. Remember, if your old car was a clunker, and you didn’t have physical damage coverage, you’d certainly want to add that to your policy before leaving the dealership.

The dealers will likely demand proof the coverage has been added unless you paid cash for the car and didn’t get a loan.

So, technically, your insurance has transferred to the new car.

[What is gap insurance? Do you need it?]

Adding a Car to Your Collection

If you simply purchased a new car and didn’t “drop” one in the process, you are required to notify your insurer much sooner. Perhaps within 2-3 days. Of course, your insurance premium will increase at this point and the insurer will want to get everything adjusted sooner.

Again, contact your insurer prior to making the purchase. You certainly don’t want to drive off the lot uninsured.

As discussed above; many car dealerships won’t let you off the lot without valid proof of insurance, so this may be a moot point.

And note that if your policy allows for a grace period when adding a new car, and you require physical damage coverage, the highest deductible on any vehicle on the policy will apply to your new ride until you officially add it.

For example: You currently have two cars. One has $500 collision and comprehensive deductibles and the other has $1,000 deductibles; your newly purchased vehicle will have $1,000 deductibles unless you request to have lower deductibles when you add the car to the policy.

[What is the difference between collision and comprehensive coverage?]

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Transfer Coverage to a Non-Owned Vehicle?

Nope! This cannot be done. The standard personal auto insurance policy will cover only cars that YOU own…however your policy will cover you from a liability standpoint. Your policy will not “transfer” coverage to a friend’s car.

When it comes to insurance, try to remember that, “the coverage follows the vehicle.”

For example: Your friend owns a car that’s currently not insured. You want to borrow the car and your hope is that your insurance policy will cover your liability and physical damage to your friend’s car.

Technically, your liability is covered here, on an “excess” basis. This means that if the car you borrow IS insured, your coverage would only come into play if the policy limits are exhausted on the friend’s car first. If the friend’s car IS NOT insured, your policy will cover you on a “primary” basis.

We are only talking liability-only here. Your policy will only pay for damages (bodily injury and property damage) to OTHERS that result from your negligence, i.e. you caused the accident.

Even if you have full coverage auto insurance, your friend’s car is NOT covered. If you cause an accident or simply back into a street sign, your policy will provide NO coverage to repair your friend’s car.

Read more: Auto insurance: Am I covered?

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