Buying a New Car and the Impact of Changing Car Insurance?

When we say purchasing a new vehicle and changing car insurance, it does not necessarily mean a new car as in built this year. It could mean a new vehicle to you as in another vehicle or different than what you already have. Either way, your car insurance policy will have to be changed or modified.

Adding another vehicle will probably be the easiest. If you are keeping everything else the same and just adding a new vehicle to the policy, then you will most likely receive a discount or reduced rate for already doing business with the insurer. Usually the policy will renew on the date of the first vehicle so you have a chance later to shop around for quotes. It is probably inadvisable to change insurance companies in the middle of a policy duration. In fact, the penalties are such to deter switching. When calling a new company, when a policy is in effect for a specific vehicle with another insurer, will usually result in an unequivocal “No, I am sorry, we cannot help you until the policy comes due to expire”.

Another scenario that might happen when buying a new car is the vehicle owner may insure one vehicle with the existing insurance company while requesting insurance from another company for the new vehicle. Then when the existing policy expires, the owner can give notice to the first and add the older vehicle to the newer insurance policy.

Further, even though a quantity discount may apply when adding another vehicle to an existing policy, the premium will depend on certain factors such as:

- performance level of new vehicle,
- whether it does well or poorly in crash tests,
- how appealing it is to thieves,
- and the rest of the standard vehicle questions including age, make and model…

Of course the insured person’s history with the insurance company will come into focus as well. The insurance carrier will review the file to ensure premium payments were kept up to date and made on time, they will take into account any traffic violations, and also any claims that were made will impact the rate of the new vehicle.

If the relationship is a two adult person household, for example a husband and wife, and the insurance is in one name, when the other buys a vehicle, the insurance will usually be cheaper if added to the spouse’s existing policy. Particularly if one spouse has issues that would cause the insurance to be higher. Indeed, it is quite common for husbands and wives to put the insurance in the name of the person who will receive the cheapest premium. Many times that is the wife’s name, as females in good standing tend to receive lower rates.

The last scenario is one where you trade in your old vehicle for a newer vehicle. At this point, you may be able to move away from your old insurer by letting them know in writing that the vehicle has been sold. You would then receive a pro-rated refund. But it would be best to find out first, what is better for you. Is it advantageous to have the existing insurance carrier adjust the present premium to reflect the change in vehicles or is it better to terminate the existing policy and find a new insurer?