Everyone who lives somewhere that people migrate to has heard some version of this story. Your buddy, let's call them Charlie, tells you he found a fantastic hack to save money on your car insurance. Intrigued, you ask: "well, how do I do it?" He replies: "just register your car insurance in a state where you used to live or your family lives, and you'll save a bundle."
Red flag alert! Whenever you hear a story like this, watch out!
The myth that this is a workable way to save money on insurance is most common among car owners — since most homes don't move across state lines — especially among transplants and folks with family in different states.
Some buyers believe they're still covered at their pre-existing rates if they don't switch their driver's license, title, and insurance to their new state. They're wrong.
The truth is that you aren't getting a deal: instead, your insurance is now worthless because if disaster strikes, your insurer will deny your claim due to fraud.
While there may be some leeway in state requirements to update a driver's license and car title — some states like California offer ten (10) days to switch driver's licenses while others allow up to ninety (90) — you will not receive a payout in the event of an accident or claim if you've failed to transition your policy and vehicle documentation to a new state.
Worse, dependent on the severity of the accident, you could be on the hook for a loss that can trigger bankruptcy.
The refusal to payout can happen for several reasons: a lack of cross-state licensing from your agent, different regulations governing insurance requirements and policies in the new state, a claim of breach of contract by your insurer, or a straightforward claim of fraud.
In addition to the high-inertia burden of switching over insurance, a new state can often introduce higher costs due to more stringent regulations.
For example, a move from a location where the victims of an accident have a right to sue the person who caused the accident — known in insurance terminology as a "fault" state — to one where the insurance companies are responsible for paying out most small damages and injuries — also called a "no-fault" state — will usually lead to higher insurance costs.
This price difference exists because insurance buyers in no-fault states bear more expenses than accident victims that are not required to prove harm in a court of law. These higher sticker costs can dissuade a mover from switching, but the previous policy won't provide any coverage if you've relocated.
This lack of a valid policy makes driving an even more risk-laden activity with an even higher potential for bankruptcy. The only difference is that it's now hidden behind a lawsuit or failed claim from your previous insurer.
We can't re-title your car and update your driver's license, but we can make the insurance search part of your move as pleasant as possible. Coverage Cat is happy to hunt for your new policies and consider both your existing agent relationships and the potential savings of new insurers in your future home state.
Whatever it takes to get you the best coverage at the lowest price. In a conclusion that won't surprise folks who have read our other posts, the best way to manage your risks is to sign-up with Coverage Cat, know how your insurance works, and make sure you stay compliant whenever you move.
Drive safe!
