After buying a new car, you might think about changing your insurance policy or even question whether or not you are required to change it. Changing your insurance to a new automobile is as simple as transferring the old policy. The main precaution is to make certain that you comply with state law when you do switch.
Have Insurance Coverage From the Outset
If you do not like your previous insurance plan, you can shop around for the policy you need before buying a car. It is always advisable to purchase car insurance before acquiring a vehicle regardless of whether it is new or used. After financing the auto, your dealership does not provide you with coverage.
It can lead to huge losses if you drive a car without insurance, and it may also make your future probabilities to get one less likely. Your policy dealer may have switching penalties that you also need to look out for or discounts available. Here are a few considerations you need to make before switching after buying a car.
Insurance Grace Period
If you already own a car, when buying a new one, your insurance company automatically covers your new car for a period of four days. This is called the grace period. If you have not made arrangements for coverage by the end of this time, your new car will no longer be covered. When you don’t have a policy for a new auto, you must buy it before possessing the car.
However, depending on the company, there might be some glitches with the process. If the company does not offer any grace period, you must have full coverage before driving the vehicle. In the event you don’t switch the insurance policy, your policy can be canceled.
According to the rules in some states, insurers need to offer you a letter before canceling your plan. The grace period for this varies according to your state’s laws and policy. You must read through your state policy laws to get information about cancellation and the grace period. In some states, it could take 10 to 20 days to cancel your coverage.
In others, car insurers can cancel your plan immediately if you miss the due date. At times, the grace period can range from 24 hours to a month depending on your region, and there are stipulated steps you should take before a lapse in coverage. In the event of a lapse in coverage, you become vulnerable in the case of an accident whether you are at fault or not.
Only a few insurers accept late payments, so the grace period is of little value when changing your car insurance. Many companies charge late fees that add to your overall rates in the long run.
What Are the Charges to Amend Your Insurance Policy?
There is a fee you have to pay to amend the policy terms of covering your new wheels. It is typically stated in the terms and conditions of the policy to ensure that you are aware that you can pay a higher fee when you buy a more powerful or expensive car. Your rates will not remain the same. You pay a higher premium to compensate your insurer for taking on more risks.
There may be extra payments if you are switching your policy, in which case they will discuss this with you once you report financing or leasing a new automobile. You can then search online for suitable quotes from other dealers and register your car to the agent of your choice. The charges will vary according to the plan you apply for in your coverage.
Why Switch Insurance for a New Vehicle?
There are a lot of reasons to switch insurance companies when purchasing a new vehicle. To begin with, many companies offer discounts on premiums for vehicles that have automatic seat belt retractors and air bags installed. Seat belt systems can be pricey, so switching carriers could save you thousands of dollars over the life of your new car.
Some of the benefits of switching insurance companies when purchasing a new vehicle are:
- Automatic seat belt retractors may save you 5% or more on your premium.
- Air bags generally qualify for an additional 3% discount.
- Newer model cars are generally cheaper to insure than older used cars.
Despite the benefits, there are several reasons why you shouldn’t switch companies when purchasing a new vehicle.
Reasons Not to Switch Insurance
One reason is that it’s not always easy to change insurance companies. You could be restricted by terms in your new car warranty, and you may need to get insurance cards before you can drive your car off the lot — especially if it’s leased or financed.
Second, there are potential “early termination fees” you could incur. These are especially likely if your new car is leased or financed since policies are required by law to have a “guaranteed insurability provision.” This means the new car dealer will need to be sure that you can’t cancel your policy before they offer you financing or sell you a lease.
The dealer is required by law to tell you of this provision, and they’ll usually insist that you stay with your current insurance carrier. If you want to switch companies, make sure it doesn’t violate any financing or leasing agreements.
If you need new insurance cards because of car warranty restrictions, get them before you go car shopping to avoid delays. Your carrier should be able to get you new cards at no charge, but it’s better not to worry about such things if you don’t need them.
Never Cancel Old Insurance Before Getting a New Policy
Try not to cancel your old policy until all of the paperwork is done. Otherwise, your new insurance may not take effect in time, and you could risk a car crash or get ticketed for driving uninsured.
Even though car dealers need to know your insurance status before they sell you a lease or finance agreement, it doesn’t mean you can’t get a new policy between signing an agreement and taking delivery of the vehicle. If you’re moving, new insurance is a good idea even if your dealer doesn’t ask.
In some states, the dealer will sign over the old registration to a new company when they sell you a lease or finance agreement. This saves time and trouble, but make sure it’s what you want.
Precautions to Take in Switching Your Insurance
You need to be careful when switching insurance companies because it’s easy to end up with more than one policy for the same vehicle. For example, companies are likely to specify new policy dates different from what you had with your old carrier. This could leave you uninsured for a brief period.
Also, make sure you don’t lose any new discounts or rate breaks because of company policies that override the dealer’s guaranteed insurability provision.
It is best to shop for new insurance coverage in advance to avoid problems when. If the dealer insists that you switch companies when buying a car, consider getting a new policy before signing a deal.
