New Car Insurance Grace Period: How Long Do You Have?
Buying a new car is a fun and exciting time in anyone’s life, but there’s more to it than choosing the vehicle that fits your needs and securing financing. You also have to deal with car insurance requirements.
Every state except New Hampshire requires some form of car insurance, and many lenders and dealerships do too.
But if you already have car insurance that offers a new car insurance grace period, how long do you have to get insurance on a new car? Below, we’ll dive into the new car insurance grace period, explain what it is, how it works, and if it can help streamline your new-car purchase.
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What is a New Car Insurance Grace Period?
The new car insurance grace period is the timeframe your insurance company gives you before you must add a new car to your insurance policy. The existing policy‘s coverages are conveyed to your new vehicle during this time, giving you some coverage if you get in an accident right after you buy a new car.
Remember that this conveyed car insurance may not be enough to satisfy all the requirements, but we’ll touch on this nuance later.
If you have no car insurance, there is no grace period. You must secure car insurance before purchasing and registering a vehicle in most states.
How Long is a New Car Insurance Grace Period?
The new car insurance grace period can vary by state law and insurer, so check with your insurance company to understand the rules. However, the typical new car insurance grace period is seven to 30 days.
For example, Progressive and Allstate have 30-day grace periods, whereas State Farm has a 14-day grace period.
You can safely drive your vehicle during this time, knowing it has the same coverage as your previous vehicle.
Keep in mind that not every insurance company offers this grace period, so always check your car insurance policy for specifics. If you can’t find the details in your policy documents, you can always call your insurance company and ask a representative what the company’s new car insurance grace period is. They should have this information readily available.
Can I Register the Vehicle Without Adding it to the Insurance Policy?
Some states may allow you to register the vehicle if you’re within the car insurance grace period and haven’t officially added it to your policy. However, your local Department of Motor Vehicles (DMV) may reject your registration application for insufficient proof of insurance coverage.
Contact your local DMV and ask about the insurance requirements. Some states only need proof you have car insurance, while others require insurance on the specific vehicle you’re registering.
What Happens if I Exceed the New Car Insurance Grace Period?
Your auto insurance policy will lapse if you exceed the new car insurance grace period. In that case, you’ll need to shop for a new policy or speak with your insurer about reinstating your car insurance coverage. Some have grace periods where they can reinstate your policy and roll back the lapse, so you have continuous coverage again.
An insurance coverage lapse leaves you open to financial loss in an accident because you have no auto insurance, and it can end up costing you money down the road. Many insurance providers view those with policy lapses as a higher risk. As a high-risk driver, your car insurance premiums may be higher.
On average, those with a policy lapse on their record pay about $200 more per year for full-coverage insurance.
Do Car Dealership Proof-of-Insurance Policies Affect a New Car Insurance Grace Period?
Many new and used car dealerships have their own insurance requirements, regardless of your new car insurance grace period. These dealerships may require immediate proof of insurance on the vehicle before you can drive it off the lot.
This policy, of course, overrides anything your car insurance company says, as they control the sale and delivery of the vehicle. Fortunately, it’s simple to get auto insurance rates and buy a new policy instantly online using the vehicle identification number (VIN) and your driver’s license information to satisfy these requirements.
Auto Lender Insurance Requirements Matter Too
When buying a car, you must carry auto insurance coverage that meets two minimums. First is the state minimum requirement, which is generally just liability coverage and a minimum amount of personal injury and property protection coverage. Second, if the car is financed, you must meet the lender‘s minimum insurance requirements.
The latter will usually be a combination of comprehensive coverage and collision coverage. They may also require a maximum deductible amount and more. If your current policy doesn’t meet all the lender‘s coverage option requirements, the lender may force-place an insurance policy meeting its needs and add the premium to your monthly car payment.
You can find the minimum auto insurance requirements in your loan documents. If you don’t see it, the dealership can guide you, or you can call the lender to ask a representative about the company’s minimum insurance requirements.
What if Your Current Policy Doesn’t Meet the Dealer or Lender Requirements?
If your current policy doesn’t meet the lender or car dealership‘s minimum requirements, you can still drive off the lot in your new car with a little legwork.
Your first option is to contact your current insurer and request the additional coverage required, with the effective date being the same day. The insurer can then email or fax the declarations page or new insurance cards to you or the dealership as proof.
If your insurance company has an online portal, you may be able to make these changes yourself and email a copy of the new cards or declarations page to the dealership.
You can also simply search for a new policy online that meets the requirements and sign up for it that day. You can then have your new insurance company email or fax the declarations page or insurance cards to the dealer. From there, you’ll need to contact your current insurance company to cancel your old policy.
This will get you the proof of insurance you need to meet the dealership and lender requirements so you can take your car home today.
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