Selling Auto Insurance: Cross-State Rules

The sale of auto insurance across state lines is a contentious issue. While some argue that it would increase competition and lower prices, others dispute the idea that it would significantly reduce premiums. In reality, auto insurance is typically purchased in the state of residency, and using an out-of-state address to insure a car is considered insurance fraud. However, there are exceptions for part-time residents, students, and military personnel. Additionally, most car insurance policies cover temporary out-of-state trips, but long-term stays may require updating the policy to match the new residence.

Can you get auto insurance in another state?

Yes, you can get auto insurance in another state, but it depends on your situation.

Temporary Trips

Your standard auto insurance policy will typically cover you for temporary trips to other states in the US and Canada. This is usually the case whether you are on vacation, commuting to another state for work, or taking a long road trip. In these instances, your car insurance policy will adhere to the laws of the state you are in. However, it is worth noting that your American car insurance policy will likely not cover you in Mexico, so you may need to purchase a short-term Mexican auto insurance policy.

Permanent Moves

If you are permanently relocating to another state, you will need to update your insurance policy with your new address. You should do this as soon as you know you are moving. If your current insurance carrier writes policies in your new state, you can ask them about the cost of a new policy at your new address. However, it may be worth shopping around for a new policy, as your current carrier may not have the best rates in your new state.

Part-Time Residents

If you split your time between multiple states, you may be able to get auto insurance in either of the two states. In most cases, your car must be insured in the state where it is registered. However, if you have multiple vehicles kept in different states, you will likely need separate insurance policies for each vehicle based on the state in which they are kept. Some states also have specific requirements for the number of days you can spend in the state before you need to register your car there.

College Students

College students who attend school in a different state may or may not need to buy a new policy, as this depends on the laws of the state. In some states, students are allowed to maintain out-of-state registration and remain on their parents' insurance, while in others, they are required to purchase a separate, out-of-state policy.

Military Personnel

Most states allow military members to continue coverage from their home state while they are stationed elsewhere. However, if you are moving to another state as part of a permanent change of station, you will likely need to purchase new coverage.

Does auto insurance cover you out of state?

If you're going on a road trip or a short trip to another state, your auto insurance will cover you. This is true even if you're driving in a state with different rules about insurance than your own. However, if you're permanently relocating to another state, you'll need to update your insurance policy with your new address.

For shorter trips, almost all car insurance policies will cover you anywhere in the United States, regardless of how far you travel or how frequently you make the trip. This includes vacations to other states as well as commuting from one state to another. For example, if you live in New Jersey and drive into New York City for work.

Additionally, if you have the minimum legal coverage for your state and get into an accident while on an interstate trip, your insurance policy will function as though you had the appropriate minimum amount of car insurance for the state in which the accident occurred. For example, if you live in Tennessee and get into a crash in a no-fault state, you would be able to use personal injury protection (PIP) coverage to pay for your medical costs after the accident, even if you don't have that coverage.

However, if you're driving across international borders, you'll need a new, temporary policy to cover you there. Your car insurance policy will not cover you in Mexico, and it may not cover you in Canada. Check with your insurance company before you go on a road trip, as they can confirm whether your policy will cover you. If you don't already have coverage, your auto insurance company will likely be able to sell you a temporary endorsement to cover you while traveling.

In general, you need to buy car insurance in your state of residency. Therefore, you should transfer your car insurance and registration if you move to a new state. It's typically illegal to live in one state and register your car in another. Plus, if your insurer finds out, it will likely cancel your coverage and deny any pending claims you have. Every state has its own definition of residency, but typically, if you continuously live in a state for more than a few months, or live and work full time there, you are considered a resident.

Does auto insurance cover college students out of state?

Whether you're a college student or the parent of one, you may be wondering about auto insurance coverage for out-of-state students. The answer depends on several factors, including who owns the vehicle, the location of the college, and the student's primary address. Here's what you need to know:

Keeping Your Student on Your Policy

In most cases, college students can remain on their parents' auto insurance policy, especially if they haven't permanently moved out. This option is often more convenient and affordable for families, as it allows them to split the cost of certain coverages and easily share vehicles when the student is home. Additionally, students under the age of 25 can build a continuous insurance coverage history, which can lead to lower premiums in the future.

However, it's important to notify your insurance company about the student's new address and verify that the parents' home remains their primary address. Some insurance companies may require additional information, such as the college's ZIP code and whether the student is living on or off-campus.

Taking Your Student Off Your Policy

If your student won't be taking a car to college, especially if they'll be living on campus and not visiting home often, removing them from your policy could result in significant savings. The amount you save will depend on your student's age and driving record. However, some insurance carriers may not allow you to exclude a licensed driver in your household who is already listed on the policy.

If your student is excluded from the policy, remember to add them back before they come home for breaks if they plan to drive during that time. Additionally, discourage them from driving a friend's car while away at school, as the friend's insurance policy may not provide adequate coverage in the event of an accident.

Getting a Separate Policy for Your Student

If your student owns their car and has their auto insurance policy, they will need to contact their carrier to determine if changes are needed. Insurance companies typically have mileage restrictions for out-of-state drivers, and the policy will need to be rated and updated accordingly.

If your student plans to remain out of state for most of the year, including summer breaks, they may be considered a resident of that state, and a policy change will likely be necessary. It's important to check with your insurance company and the Department of Motor Vehicles (DMV) in the state where your student is attending school to understand the specific requirements.

Discounts for Out-of-State College Students

Out-of-state college students and their families may be eligible for various discounts that can help offset the cost of auto insurance. These include:

• "Student away at school" discount: If the student is attending college more than 100 miles away and is not bringing a car, you may qualify for a discount of 15% to 30% on your premium.
• Good student discount: Students who maintain a B average or higher (up to age 25) may be eligible for a discount of 5% to 25% on their premium.
• Defensive driving course discount: Completing an optional defensive driving course can sometimes trigger a rate reduction.
• Accident-free discount: Students with a clean driving record may be eligible for a discount.
• Technological monitoring discount: Installing a telematics device in your student's vehicle to monitor driving habits can lead to lower premiums.

Can my car be registered in one state and insured in another?

Registering and insuring a car in different states is generally not allowed. Your car should be registered and insured in your state of legal residence. However, there are a few exceptions to this rule.

If you are a member of the military, you can declare residency in the state to which you intend to return after deployment. While laws differ across states, most allow active-duty military personnel to register their vehicles in their home state, even if they are stationed elsewhere.

College students attending school out of state may also be exempt from this rule. They can usually stay on their parent or guardian's insurance policy, but they will likely need to register any vehicle they bring with them or purchase in their new state.

If you split your time between multiple states, such as having a vacation home or commuting for work, you may be able to keep your car registered and insured in one state. However, it is important to discuss this with your insurer to ensure you have the correct coverage and avoid issues when filing a claim.

While it is possible to buy, register, and insure a car in one state while holding a driver's license in another, this is typically only allowed if you have a good reason, such as being a student or having a vacation home in another state.

In most cases, you must register and insure your vehicle in the state where it will be primarily driven. This is because insurance companies require you to insure the vehicle in the state where it will be driven for the majority of the year.

What is the impact of selling auto insurance across state lines?

Selling auto insurance across state lines has been a popular proposal among Republicans for some time. The idea is that it would promote more competition to bring down the prices of policies. It would also cut down on state insurance regulations, as insurance companies would choose to sell policies out of states with fewer regulatory requirements.

However, critics argue that this provision would erode many state government consumer protections, leave policyholders with inadequate coverage, and could even lead to higher premiums for some people. They also argue that cross-state sales of insurance are unlikely to produce any cost savings for consumers. Because out-of-state insurers have no current relationship or market share with in-state hospitals and physician practices, it would be difficult for these insurers to establish networks that can compete with established in-state carriers. This would make it hard for out-of-state insurers to negotiate sufficiently low payment rates to enable them to offer competitively priced plans.

Some experts also argue that selling insurance across state lines would make it harder for older and sicker adults to get adequate coverage at an affordable price. Interstate health plans would likely result in bare-bones plans with high out-of-pocket costs. As the young and healthy congregate in low-premium, high-deductible plans, insurers would become more reluctant to offer comprehensive policies. This would make it harder for older and sicker adults, who need more health care services, to obtain adequate coverage at an affordable price.

Selling insurance across state lines could also have unintended consequences such as market segmentation that could threaten the viability of insurers licensed in states with strict benefit coverage, issue, or rating rules. The ability for high-risk individuals to obtain coverage could be compromised as a result.

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