This is a great question and one we get asked often. Yes, your new car is insured but it may not be properly insured or insured to its full value.
Generally, when purchasing a new vehicle you will have a grace period under which the new car is covered – but keep in mind that it will be covered with the same coverage as your previous car. This means if your current vehicle does not have collision coverage on it, your new vehicle won’t either. Your new vehicle will also be insured to the value of your old vehicle, including whatever loss settlement you have on that policy.
We recommend contacting your broker as soon as you’ve purchased your new vehicle to get the ball rolling on your insurance. Your broker will help ensure you have the proper amount of insurance and should ask if you’d like any changes to your policy with a new vehicle.
Buying a New Car
If you’re trading in an older model for a brand new vehicle, odds are pretty good that your coverage will be inadequate when it comes to protecting the new vehicle. If you have not yet informed your broker about the purchase you could stand to lose substantially if there is an accident or some other such incident before you get the chance to switch your policy and make it suitable for the new vehicle.
For example, let’s say within a few hours of driving your new car off the lot a collision occurs. The car is damaged significantly. The previous insurance policy for your 12-year-old vehicle was written in accordance with the value of that vehicle. Now you’re definitely stuck as your grace period coverage is based upon your old vehicle’s value.
When should I notify my broker?
Often the best course of action is to notify your insurance broker of the impending purchase right from the dealership—before you drive away. Switching your policy discussing options regarding your new car and its value as far as coverage goes and looking at the types of coverages you want to be included can be done very easily and quickly over the phone. Your dealer will not take care of reporting the new car to your insurance for you. You need to be proactive and ensure that your new vehicle purchase is protected!