A Car insurance grace period is one of the most commonly misunderstood concerns when purchasing a new car.
If you’re buying a new car, then you know you must also either have insurance already or provided proof of insurance. Your dealer will not let you drive the car off the lot without proof of insurance cover. But, can the dealer give you a grace period before you provide the proof of insurance cover?
We took a look at ‘new car insurance grace period’ and all the scenarios to consider.
What Is Car Insurance Grace Period
You know you must always carry car insurance when you drive your car. But there is sometimes an opportunity for a car insurance grace period.
A car insurance grace period is a period, in time, when you are allowed to drive your new vehicle before adding it to a car insurance policy. This is the amount of time the state laws or your insurer allows you to drive your car without insurance or delay paying for your car insurance without a lapse in coverage.
Put simply, new car insurance grace period depends on the state laws and your insurance company. This can also vary from state to state and widely from one insurer to another.
But since you must always carry car insurance, if you don’t currently have an existing car insurance policy, you’re effectively uninsured. This means you cannot benefit from a car insurance grace period. You will, therefore, need to procure a new car insurance policy before leaving the dealership.
Grace periods are safeguards to ensure that your coverage remains intact even if you pay your insurance late. This means you can file an insurance claim for an incident or accident that happened during your car insurance grace period. If you want to file a claim during your grace period, you may first need to pay your coverage before making a claim and before the end of the grace period.
Does New Car Insurance Give You A Grace Period
When you buy a new car, whether or not you have a new car insurance grace period depends on the following:
- Your insurance company
- Your current insured status
- Your state laws
- Your insurance company’s car insurance policy
If you currently have an active car insurance policy in your name, the state laws or your insurer may allow you a short period of time – as grace period – before you add your new car to the policy. Typically, the grace period ranges from seven days to thirty days – depending on the insurer and the state.
If you buy a car from a dealership, the dealer will typically confirm your auto insurance status before allowing you to drive off the lot. If you don’t currently have car insurance, you will need to acquire one before the dealer allows you to get behind the wheel.
Do All Insurers Offer A Car Insurance Grace Period?
Put simply, not all car insurance companies offer insurance grace period. But this also depends on the state laws.
However, many insurers have car insurance grace periods to help them remain competitive. You may want to talk to your car insurance agent about different policies and plan details.
Some insurers can further allow a given number of late payments before they start enforcing stricter regulations. Usually, companies do not allow late payments for three months in a row. Other insurance companies may charge you a late payment fee or set a higher policy premium for the next car insurance renewal as a penalty for late payment.
It is not in the interest of most companies to lose you as a client because of late payment. But you also need to put effort and concern because the business is about trust.
What Happens If You Don’t Pay Your Premiums Within the Car Insurance Grace Period?
It is a blessing to have a car insurance grace period. But what happens if, even after the grace period, you still don’t pay your premiums?
If you’re unable to pay the premiums, your insurer will likely cancel your contract after the end of the grace period. This may result in the termination of your coverage.
You should avoid the situation of having your contract terminated at all costs. First of all, your insurer will stop covering you, and you will not have any coverage on your car. Secondly, the fact that your insurance contract was terminated for non-payment will affect your record and future insurance policies. For instance, you will be perceived as a high-risk individual, and another insurer may decline to offer you coverage or may charge higher insurance premiums.
Note: If you foresee that you won’t be able to pay your insurance before the end of the grace period, you can talk to your insurance agent and explain your situation. The insurer may be able to support you with an arrangement or payment plan that will enable you to keep paying for your coverage.
State Laws On Car Insurance Grace Periods
Some states may require car insurance providers to give a written letter elaborating the intent to cancel your policy before they actually cancel it. In short, the grace period all comes down to the state laws and your policy.
When reading through your car insurance policy document, pay attention to what the state laws say. You may look for a car insurance grace period and the insurance cancellation regulations.
In some states, insurance companies are required to give clients 10 to 20 days of car insurance grace periods. And if it is required by the law, it may mean that all insurers in that state will offer a grace period.
Is There New Car Insurance Grace Period When Buying From a Private Seller?
The same insurance rules and state regulations apply when you buy a car from a private seller. All drivers must have active car insurance.
If your insurer allows a grace period, the coverage will extend to you and the car from the time you purchase it until the end of the given grace period.
However, unlike a dealership unit, a private car seller may not require you to show proof of insurance coverage before driving off. So, if you don’t currently have an insurance policy in your name, you may need to purchase coverage as soon as you acquire the vehicle.
What About If I Lapse My Coverage
It’s important that you don’t allow your car insurance coverage to lapse. As stated before, if you cross the grace period limit without paying your insurance coverage, you’re likely to face serious insurance consequences.
First of all, if you lapse your coverage, you’re likely not to be covered if you get involved in an accident. This may have serious financial repercussions because you will be personally liable for any damages caused during the accident. Secondly, you may experience higher insurance premiums on your next renewal.
When you lapse on your coverage, insurers will start seeing you as a high-risk client.
Final Word
Purchasing a new car is exciting. However, you should not allow the excitement to keep you from attending important details such as securing car insurance coverage. If you cannot acquire car insurance immediately, or if you do not already have insurance in your name, talk to your insurance agent to know whether or not your insurer offers a new car insurance grace period.