Is my new car automatically covered by insurance?

It's possible that your car insurance company will provide automatic coverage for new cars or a grace period to purchase it. Review your policy to see the list of covered autos.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Sep 15, 2020

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Here's What You Need to Know...

  • Buying a new car requires a lot more planning than you might initially expect
  • Your new car may be covered under your existing policy if you are the vehicle owner
  • Failing to set your budget and do your homework can lead you to problems with your new car

With so many lenders eager to approve your credit and so many dealers eager to haggle with you, you might assume that all you need to do is step foot on the lot to drive off with an affordable piece of machinery that you love.

No legitimate car dealer will allow their client to drive off of the lot without the proper type of insurance.

If, however, you are listed on a policy as strictly a driver or you do not own a car, this can pose some serious problems that will delay the key exchange process.

Not only should you compare finance rates, you should also find out just what type of insurance rates you can expect to pay for the car that you intend to add to the family. Start comparing rates now by using our FREE tool below!

Will the new car be covered under the existing policy?

Rules and regulations regarding new cars and how they are covered vary from state to state. Some insurers have more strict rules surrounding covered autos than others.

You should always check your auto policy thoroughly to see how a new vehicle is handled. You can find information about the terms of your policy by reviewing the policy booklet and locating the section on covered autos.

In your insurance contract there are several different terms that are defined to avoid confusion surrounding what is covered and who is covered.

The policy contract will explain that only covered autos will receive the coverage that is listed on the declarations page of the contract. Some covered autos will only receive a limited amount of coverage as defined by the policy.

Covered autos always include the listed vehicle on the policy, but many people are not aware that others autos are eligible for a coverage extension.

Some additional covered autos include:

  • A newly acquired vehicle
  • A replacement vehicle
  • A trailer owned by the insured (for liability only)
  • A temporary substitute that is not owned by the insured (rental)

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Replacement Vehicle vs. Additional Vehicle

At first glance, it might appear that a replacement vehicle and an additional vehicle are the same. They are both newly acquired cars but unfortunately, that is not the case.

Classifying additional cars and replacements as the same thing can be the cause for major confusion when policyholders go out to buy a car.

It is important that you know the difference between how a new household vehicle is classified because coverage for each type of car extends in a different way and there are different notification requirements.

Here is a breakdown that is straightforward and easy to understand:

  • Replacement Vehicle – will replace a vehicle that is on the policy when a vehicle has been traded in or sold privately at the same time that a new vehicle is acquired. Replacement vehicles will receive automatic coverage for replacement vehicles for up to 30 days in most contracts. The new car will receive the same coverage as the car it replaced
  • Additional Vehicle – The rules for additional vehicles are a bit more strict because the insurer is covering two autos for the price of one while the automatic coverage extends. The coverage extension or automatic coverage period will be more limited. Additional vehicles will receive the broadest coverage on the policy for 14 days. Some companies will provide coverage for the full 30-day window

Vehicles That May Not Be Covered

Not all cars will fit the newly acquired vehicle definition. You should be sure that the type of vehicle and the ownership do not create a problem for you.

Here are the requirements that must be met for replacement or additional auto provisions to apply:

  • Must be a private passenger auto
  • Must be a pickup, utility, or van that weighs less than 25,000 pounds
  • Must be owned by the named insured or their spouse

Tips for Individuals Without Their Own Car Insurance

If you do not have insurance or you are only a listed driver on a policy, you will not have automatic insurance when you buy a car in your name.

Assuming that you will can really create problems if you drive off of the lot and you get into an accident. 

If you have a good idea of what type of car that you want to test out, you can start getting quotes for cover before you even window shop. By doing this, you can estimate how much your coverage will cost and play with the coverage options. Save your quotes and then you can stick with the quote for the car you decided on.

Do not be tempted to take the high-priced quote that the dealer has suggested before you shop on your own.

You can have your quote prepared and then use the Internet or the phone to enter the vehicle details and then make a payment. Doing this will activate your coverage right away so that you are not at the mercy of the dealer and their questionable affiliate.

It is very easy to price the cost of cover for a new car. If you do not have coverage or you want a new policy, you can start comparing car insurance rates now by using our FREE tool below!

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