Sheri and I were returning to Dallas after visiting family in Birmingham for Thanksgiving. A friend and client called me on my cell phone. Since it was Saturday, that usually means a couple of things such as they need help with a claim or a copy of their ID card because they’re getting their car inspected. In this case, it was neither, she was in the process of buying a new car, and before driving off the lot with her new car, the finance manager wanted to confirm she has a current and active car insurance policy.
I get this call on a regular basis from clients, usually when they’re at the dealership. In most cases, everything has been resolved and they’re ready to drive their new vehicle home, but they forgot to bring proof of current insurance. Most people don’t think to take proof of insurance with them when buying a new car, they simply want to conclude the purchase and drive on down the road.
There are really two underlying questions in these situations:
- When is the new car covered by your car insurance policy?
- When does it need to be added to your policy?
According to Texas insurance law, a car is automatically covered by your car insurance policy the moment you buy it. In my client’s case, as soon as she signed the paperwork and the dealer received notice of her approved financing, coverage is automatically extended to her new car. This is designed to protect you the moment you drive off the car lot. If you were immediately involved in an accident, you’re covered.
Even though coverage is automatically extended to your new vehicle, there is a time limit which dictates when your new vehicle must be added to your policy. The time limit in Texas is 14 days from when you take possession of the vehicle. If the car hasn’t been added to the policy by then, it’s technically not covered. This could result in a rejected claim if you’re involved in an accident or lapse in coverage on the vehicle which may increase what you pay to cover your new car.
What I recommend my clients take with them when shopping for a new car is a current ID card. In most instances, this will provide the proof of current insurance needed to satisfy the dealership’s finance manager. In some instances, we’ve been asked to provide a declaration page, and in others, the customer service number of the insurance carrier (company) so they may verify the policy is in force.
It’s also important to review your current policy and confirm coverage is in place to support a car loan or lease. Specifically, there should be uninsured / underinsured motorist property damage coverage at an amount which would cover the full retail price of the new car, including tax, title, and license. In addition, you’ll need to have both collision and comprehensive coverage (see http://184.108.40.206/~wiseinsu/introduction-car-insurance/).
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