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Does Car Insurance Transfer When You Trade In Your Car?

If you're planning to trade in your old car for a new one, you might be wondering: does my existing car insurance policy transfer to the new vehicle? The short answer is no - your current auto insurance does not automatically transfer when you get a new car. However, there are some important steps you need to take to ensure you have proper coverage for your new ride.


This article will cover everything you need to know about transferring or updating your car insurance when trading in your old vehicle for a new one. We'll explain the process, key factors that impact your rates, money-saving tips, and more.

Image of couple with keys to new car

For the most accurate information for you and your vehicle, we strongly recommend talking to your insurance provider!


Why Car Insurance Doesn't Automatically Transfer


Car insurance policies are specific to the vehicle insured under that policy. When you trade in your old car and purchase a new one, your existing policy terminates once the sale is complete and you no longer own that vehicle.


Insurance companies price auto policies based on many factors related to the specific car being covered, such as:

  • Make, model and year
  • Body type (sedan, truck, SUV, etc.)
  • Engine size
  • Safety ratings and safety features
  • Estimated repair costs
  • Anti-theft features
  • And more

Since your new car will likely have different characteristics than your old one, your insurance company cannot simply transfer your existing rates and coverage over. They need to re-evaluate and re-rate the policy for the new vehicle.


Steps to Take When Trading In Your Car


To avoid a costly lapse or gap in coverage, you'll want to add your new car to your policy before dropping the old one. Here are the typical steps to follow:

  1. Notify your insurance company that you're trading in your old car for a new one. Give them the pertinent details about the new vehicle.
  2. Your insurer will provide new pricing for the same or similar coverage on the new car.
  3. Review and approve the new rates and coverage before finalizing purchase.
  4. Once you take delivery of the new car, call your agent again to confirm the change and new start date.
  5. Cancel coverage on your old car once that vehicle is no longer in your possession.

It's important to have the new car added to your policy before taking ownership. That way, you'll have seamless coverage with no lapse between vehicles.

Factors That Impact Your New Car Insurance Rates


When you trade in your old car for a new one, your insurance rates will change accordingly based on characteristics of the new vehicle. Here are some of the key factors that can cause your rates to go up or down:

  • Purchase price - A more expensive new car will cost more to insure.
  • Safety ratings - Cars with higher safety ratings from IIHS and NHTSA typically cost less to insure.
  • Repair costs - Vehicles with higher repair costs due to complex design or hard-to-find parts often have higher premiums.
  • Anti-theft features - Vehicles equipped with anti-theft devices can qualify for discounts.
  • Engine size - Larger, more powerful engines typically translate to higher insurance costs.

Additionally, your own driver profile (age, driving record, claims history, credit score, etc.) plays a major role in determining rates, regardless of the vehicle.


Money-Saving Tips When Insuring Your New Car


While your insurance rates will inevitably change when you trade in your old car for a new one, there are some steps you can take to keep costs down:

  • Bundle policies - Many insurers offer discounts when you bundle auto and home/renters insurance together.
  • Increase deductibles - Opting for higher deductibles on collision and comprehensive coverage can lower premiums.
  • Maintain good credit - Drivers with higher credit scores tend to pay lower insurance rates.
  • Inquire about discounts - Ask about discounts for safety features, low mileage, good student, defensive driving and more.
  • Shop around - Gather new quotes from multiple insurers to find the most competitive rates for the coverage you need.

By being proactive and exploring potential savings opportunities, you can keep insurance costs under control when insuring your new vehicle after a trade-in.


The Bottom Line


While your existing car insurance policy does not technically "transfer" over when you trade in your old car for a new one, it's a straightforward process to update your coverage for the new vehicle. Just be sure to add the new car before taking ownership and dropping the old one from your policy to avoid lapses in coverage. With a little preparation and shopping around, you can find the right auto insurance protection at the best possible rates for your new wheels.


The information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.

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