Will my existing insurance policy on my old car cover me for property damages I caused with my new uninsured car?
UPDATED: August 1, 2017
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident law decisions. Finding trusted and reliable legal advice should be easy. This doesn't influence our content. Our opinions are our own.
As a general matter, the auto insurance you had on the old car won't be applicable to the new uninsured vehicle. Without insurance, you may be sued for negligence and may be liable for any property damage done to the cars you hit.
Your existing policy will provide coverage IF (1) your current automobile insurance policy, by its plain terms, automatically extends coverage to newly purchased cars; (2) you have the relevant insurance under your existing policy (liability coverage for damage to other vehicles or property; collision or comprehensive coverage for damage to your own car); and (3) you have informed your insurer of your new car purchase within the grace period allowed in your policy (typically 7 – 30 days). Note that if you have automatic coverage but failed to make that phone call to your insurer within the specified window, you will have no insurance and will have to pay out of pocket for repairs to your new car—or for damage to another’s vehicle—if an accident happens. That is because insurance policies are contracts, and you therefore need to comply with their terms, the same as you need to comply with the terms of any contract—if you fail to provide the notice required by the policy, then you will have breached it, and therefore will not be covered.
Accordingly, before you drive that new car off the dealer’s lot, check with your insurance company to see their exact requirements to add your new vehicle. Whatever your coverage is on your old car will match the coverage on your brand-new car—unless, that is, you specifically opt to change the coverage, which is your right. (Of course, if you increase coverage, you will have to pay more.) For example, say that your old car was a clunker – barely operational -- on which you did not carry either collision or comprehensive coverage because it wasn’t worthwhile paying for such coverage. As a result, your new car won’t have comprehensive or collision coverage either, unless and until you notify the insurer to add that coverage.
Before taking possession of the new car, you have to provide proof of insurance coverage to the dealer, or the dealer may require your insurer to fax over proof of insurance. Even after doing that, you will still have to report your purchase to your insurer within the allotted time; failure to do so will cost you coverage.
If you decide to finance or lease the vehicle, the finance company or the lender will require you to obtain comprehensive and collision insurance as well as gap coverage to ensure that it is protected. If your auto policy lapses, the lender will obtain coverage (at a much higher rate that you would pay, if you bought insurance on your own) and add it to your loan. Known as the “forced place” clause, it provides protection to the lender, not you.