Insuring a New Automobile

Thinking about buying a car over the weekend? How do you get coverage on the new car when your insurance agent’s office is closed?

Auto dealers make it very easy to buy a new car these days. New car buyers usually need to provide only an ID card showing proof of liability insurance and off they go. This practice makes it easy for the dealer and the buyer to overlook property insurance coverage on the new vehicle. The same thing is true if you intend to purchase a vehicle from a private seller.

Unfortunately, the only way to be sure you have exactly the coverage you need on a newly purchased vehicle is to call your agent before you drive away from the dealership. That of course is not always possible. Fortunately, all policies provide some automatic coverage on newly acquired vehicles, but not all policies provide the same automatic coverage.

The first important point to know is that your policy provides coverage only on new vehicles purchased or acquired by the person who is named on the policy – the “named insured” – and the spouse of that person if he or she resides in the same household. If you are going to acquire a new vehicle for one of your children or another relative, and intend to issue the title in that person’s name, there is no automatic coverage on your policy. If that is the case, you definitely need to contact your agent before driving the new vehicle away from the dealership or the private seller’s location.

In addition to the ownership requirement, automatic coverage applies only to certain types of vehicles. Cars are covered, as are pickups, vans and SUVs with a GVW (gross vehicle weight) of less than 10,000 pounds, as long as they are not used for transportation of goods in a business. (Some policies will cover new pickups, vans and SUVs up to 25,000 pounds.)

Once you are OK with the ownership and size and use requirements, it’s important to know that not all policies automatically provide “full coverage” on newly acquired vehicles. The coverage you get may depend on whether or not you are trading in one of your current vehicles for the new vehicle at the time of the sale. One auto insurance policy sold in Texas only provides the coverage you currently have on the traded vehicle. If the traded vehicle is a “clunker” covered only for liability, then liability is all you will get on the newly acquired vehicle, even if it’s a brand-new car. Other policies sold in Texas provide comprehensive and collision on newly acquired vehicles even if none of the other vehicles on the current policy carry that coverage.

Even if a policy provides “full coverage” on a newly acquired vehicle, the automatic coverage only lasts for a few days – as long as 30 days on some policies but as short as 4 days on others. You must call your agent before that period ends in order to finalize the details.

As you can see, there are big differences between policies sold in Texas with regard to automatic coverage on a newly acquired vehicle.

If you are going to shop for a new vehicle, call your agent before you go. Your agent can review your policy and ask a few questions. Then he or she can tell you if it’s OK to drive the new vehicle away from the dealership or private seller’s location without calling first to give details about the purchase. Be sure to call your agent on the first business day after your purchase, so the final details on the coverage can be arranged.

If your agent says you need to call first, be sure call back as soon as you are ready and then wait until he or she confirms that coverage has been purchased before you take possession of the new vehicle.

This article was prepared and made available to your agent by the Independent Insurance Agents of Texas, which is solely responsible for its content. Please read your insurance policy. If there is any conflict between the information in this article and the actual terms and conditions of your policy, the terms and conditions of your policy will apply. The Independent Insurance Agents of Texas is a non-profit association of more than 1,800 insurance agencies in Texas, dedicated to helping its members succeed, in part by providing technical resources that explain insurance policies sold to their customers.

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