Asking for a friend, insurance question

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A friend had an old car that he had full coverage on, then one day he sold it because he ordered a new car. When he sold the car, he didn't tell his insurance company he sold it, but he told them he wants to reduce the coverage from comprehensive to liability only. Then one day the manufacturer told him the car will be ready soon, and he told his insurance to increase the coverage back to comprehensive, so he can take advantage of the insurance company's automatic coverage (30 days), and he need the coverage to get the car loan (say about 25% of the car's purchase price).

This is when it gets interesting: the return back to full coverage takes 5 days of wait. He got the new car on the 1st day of wait (loan approved, down payment, sign and drive the new car home, etc), and on the 4th day he got into a car accident. Supposedly, he "forgot" to tell the insurance company immediately he got a new car, and he only told them when he was filing the claim at the same time. Who's at fault I don't know, but he somehow forgot to turn off the phone he used for dash cam footage, and the footage got roll over and overwritten. He was doing a left turn when the arrow was green, and the guy that hit him head-on was supposedly speeding.

So, now he has only liability at the time of accident, the insurance company says he is on his own repairing his new car. Is that how it supposed to work? How did the lender not verify the insurance is not notified and his policy started? How do people driving off the dealer's lot get coverage if they trade in an old beater on a Sunday?
 
Why did he sell the vehicle but keep it on his insurance at all?

Depending on your state and insurance carrier, there is generally a grace period where they'll cover the new car. How long that period is though is something you'd really have to ask your insurance carrier.
 
I've never been allowed to drive off a lot with a new car without the dealership having proof in writing that I had insured the car. The dealership always asks me to call my insurance company right then and there and they always go through all my coverage info and then talk to the dealership. How'd your friend bypass this part and not know exactly what coverage was on the car?Why would he sell a car and reduce coverage and not cancel it?

Honestly, he sounds kind of clueless and his situation could've been prevented multiple times if he had just done what he (everyone) is supposed to do when they sell (cancel insurance) and buy a car (review coverage and make sure it's in place BEFORE you drive off the lot). That five day waiting period has to only be in place because the insurance company was under the impression he was changing insurance coverage for the same car in his possession and not because he sold and bought a new car.

Sounds like he's in trouble.....
 
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Originally Posted by PWMDMD
I've never been allowed to drive off a lot with a new car without the dealership having proof in writing that I had insured the car. The dealership always asks me to call my insurance company right then and there and they always go through all my coverage info and then talk to the dealership. How'd your friend bypass this part and not know exactly what coverage was on the car?Why would he sell a car and reduce coverage and not cancel it?

Honestly, he sounds kind of clueless and his situation could've been prevented multiple times if he had just done what he (everyone) is supposed to do when they sell (cancel insurance) and buy a car (review coverage and make sure it's in place BEFORE you drive off the lot). That five day waiting period has to only be in place because the insurance company was under the impression he was changing insurance coverage for the same car in his possession and not because he sold and bought a new car.

Sounds like he's in trouble.....


I've never called my insurance the day of or prior to acquiring a new auto (even when I'm not trading in). Where the guy messed up was that his coverage was on liability only at the time of acquiring the new vehicle and then not calling within the policy's specified notification timeframe. My policy states:

Coverage for a newly acquired auto is provided as described below. If you ask us to insure a newly acquired auto after a specified time period described below has elapsed, any coverage we provide for a newly acquired auto will begin at the time you request the coverage.

For any coverage provided in this policy except Coverage For Damage To Your Auto, a newly acquired auto will have the broadest coverage we now provide for any vehicle shown in the Declarations. Coverage begins on the date you become the owner. However, for this coverage to apply to a newly acquired auto which is in addition to any vehicle shown in the Declarations, you must ask us to insure it within 14 days after you become the owner. If a newly acquired auto replaces a vehicle shown in the Declarations, coverage is provided for this vehicle without your having to ask us to insure it.

Collision Coverage for a newly acquired auto begins on the date you become the owner. However, for this coverage to apply, you must ask us to insure it within:
(1) 14 days after you become the owner if the Declarations indicate that Collision Coverage applies to at least one auto. In this case, the newly acquired auto will have the broadest coverage we now provide for any auto shown in the Declarations. (2) Four days after you become the owner if the Declarations do not indicate that Collision Coverage applies to at least one auto. If you comply with the 4 day requirement and a loss occurred before you asked us to insure the newly acquired auto, a Collision deductible of $500 will apply.

I usually just call the next business day when I buy a car to be on the safe side but I have plenty of time. This guy is an idiot for not calling the next business day to add the new auto.
 
Originally Posted by Skippy722
Why did he sell the vehicle but keep it on his insurance at all?


Maybe in his state the tags stay with the car and if the buyer causes an accident before transferring registration, he would be covered?
 
czbrian....my guess is in MA we do not have "insurance cards" and all insurance info is on the state registration. No insurance info day of sale = no registration. In MA it has always been the same across many car companies....they literally make me call my insurance company in front of them, review coverage and then ask to speak directly to the agent and they require something to be faxed to them before I can leave with the car. It is foolproof and easy....
 
Your friend is in a big heap of trouble not to mention he tried to defraud them. I suspect he will be on his own for good as the company will drop him entirely which they should.
 
Since your friend probably made a very expensive mistake, he should spend the first couple hundred bucks on an attorney who knows the laws of the State this pertains to.
 
Originally Posted by atikovi
Originally Posted by Skippy722
Why did he sell the vehicle but keep it on his insurance at all?


Maybe in his state the tags stay with the car and if the buyer causes an accident before transferring registration, he would be covered?


There's got to be a form the former owner can turn in absolving themselves of liability if this occurs.

I always cancel my insurance on a car I sell the next day, and maintain a copy of the bill of sale.

As for OP's friends problem, they need to check their policy from their state for their situation as they're all different.
 
Your friend is on his own and lucky if he's not prosecuted.

1) Sold a car, but did not tell insurance and downgraded to liability only.
2) Bought a new car and then added liability to a policy for another car (the one he sold but did not tell the insurance about)
3) Would the premium have been the same?
4) The 5 days wait is normal to limit fraud.
5) Insurance could take him to court even after denying coverage for attempted fraud.
 
I don't understand what car was crashed - the new one or the old one.

Banks wont let you get a car loan without an insurance binder providing full coverage in my state (NH)

If there was a crash in an intersection the there were WITNESSES and

Likely traffic camera footage.

If driver( freind) not at fault I don't see the issue other than some slight technicality that there was no coverage overlap.
________________________________________________________________________________

If there was full coverage the ins. co. should provide lawyers and do the crash investgation.

Was a police report filed? and who was noted at fault on that?
 
This story starts out bent and never straightens out..

Friend sold car but didn't cancel coverage, but did reduce from full coverage to liability. Huh?

New car coming in so increase policy back to full coverage on a car he doesn't own. Huh?

Forgets to tell insurance he took delivery knowing about the 5 day lag in change?

Dash cam footage proving other driver at fault erased?

Seems like lots of effort expended to save a couple of dollars somehow by scamming the insurance and got caught out before the scam was completed.

What was to be gained by not playing by the rules?

Let your friend sort it out.
 
When I bought the Caravan I got on the insurance company app and added coverage for new vehicle which replaced old car. Took less than 5 minutes before I drove off lot. They handled everything from the app and dealership got a copy as I sent information from my phone to wireless printer. Salesman stated he wish more people would do it this was as everyone is covered.
 
I paid cash for a used Buick Encore. Called the agent, but it was Saturday and I didn't have proof of insurance when I got the car. From now on everything will be done online. The salesman wasn't going to release it. I said "You got the cash, it's not your concern if I total it pulling out on the street." The finance manager set him straight and he gave me the keys.

I can't figure out how he got the keys from the dealership if there was financing involved.
 
I don't know any bank up in the Northeast that will let you off the lot without an Insurance binder or proof of Full coverage**. This would be on an Auto loan not personal or bridge loan.

What is wrong with CA?

** this would be low deductable Comprehensive and Compulsory

Since the "friend" is not at fault, is there camera footage from State or Town traffic cams in the area
and How does the Police report assign fault
 
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Originally Posted by ARCOgraphite
I don't know any bank up in the Northeast that will let you off the lot without an Insurance binder or proof of Full coverage**.


True but does the lender have some special insurance for these rare cases if the borrower stops paying on the loan and the asset has significantly diminished value?
 
I don't let myself off the lot … pretty short phone call to get the new VIN on the policy …
 
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