Do you know how your auto insurance covers you when you are driving outside the state you reside? Most US auto insurance policies will cover you when you are driving inside the United States or Canada. But auto insurance is regulated by each state, so auto insurance law and mandatory or compulsory coverage will vary from state to state. Are you properly insured when you drive out of state? Will you be held responsible for a gap in your coverage, due to different compulsory insurance laws? Some auto insurance companies provide broader out-of-state coverage than others. This blog post will explain the issues surrounding out-of-state coverage, whether you are travelling in another state for your work commute, vacation, or other reasons, or if you have moved to a new state, to help inform you how to choose the right policy & coverage to meet your needs.

Auto insurance coverage can be very different among states. Michigan currently requires unlimited medical coverage (to my understanding, and the state is considering changing the law, so check with your agent about your coverage, and do not rely on this blog post to confirm how your auto insurance coverage works), New Yorkers can take up to $250,000 per person for medical payments, and California requires no medical payments coverage at all. Living & driving in a multi-state area can complicate your coverage when you have a claim.

For example, if you live in Pennsylvania, but drive in New York or New Jersey to go to work, the mandatory coverage is different in all three states. In Pennsylvania, there is no Personal Injury Protection (PIP) law, which some states have as ‘No Fault” coverage, to pay the medical bills of people injured in car-related accidents, regardless if anyone is responsible. PIP laws can be similar, but each state’s PIP law is unique. New Jersey auto insurance law requires drivers to have at least $15,000 medical payments per person, as part of the basic PIP coverage mandatory in the state. New York requires auto insurance with $50,000 medical payments per person under NY PIP law. Most auto insurance companies offer an optional Medical Payments coverage for their customers living in states without a PIP law, like Pennsylvania, but this coverage is not adequate to comply with either the NJ, NY, or any other state’s PIP law. Most auto insurance policies have an out-of-state coverage provision, but what is covered can vary from company to company. Many agents misunderstand how out-of-state coverage works, and misadvise their customers they are covered for all mandatory coverage required by a state.

Don’t rely on your agent or company to explain out-of-state auto insurance coverage correctly.

In my experience, I have seen many insurance professionals — agents and company employees — explain out of state auto insurance inaccurately, leading customers to think they have auto insurance coverage they do not have. You may think, if you are told by an insurance company employee or agent you are covered, your company is obligated to cover you in the way coverage was explained to you. This is not the case. When you buy an insurance policy, the company mails you a written, legally-enforceable contract, detailing the terms and conditions of your insurance coverage. It is this document that determines how your coverage works, and it is not superceded by anything your agent or company says.

Here’s the common mistake made by many agents/company employees: The most common out-of-state insurance clause, written in the auto insurance policies of many companies, applies only to the mandatory liability limits required by the state where you are driving.

For example, California auto insurance policies with the minimum state required liability limits provide $15,000 per person Bodily Injury Liability (If you are legally responsible for injuring someone due to the use of your car), $30,000 per accident for Bodily Injury Liability (If you are legally responsible for the injury of more than one person, per occurrence), and $5,000 per accident for Property Damage Liability. If you have a California auto insurance policy, and you are responsible for an accident while driving your car in Oregon on vacation, if your policy has an out-of-state auto insurance clause, you will be covered to the extent of Oregon’s minimum required auto insurance liability limits, which are higher than the California minimum required limits, at $25,000 per person Bodily Injury Liability, $50,000 per accident for Bodily Injury Liability, and $15,000 per accident for Property Damage Liability.

However, Oregon residents are also required to have a minimum $15,000 per person for medical payments on their auto insurance, as part of the Oregon mandatory PIP coverage. The out-of-state coverage on your California auto insurance policy is not likely to cover this mandatory Oregon coverage. The mistake, often made by many agents, is if you ask your company or agent about out-of-state coverage, they will say you will be covered for all mandatory coverage required by the state wherein the accident occurred. But the policies of many auto insurance companies cover only the mandatory liability coverage limits required by the state, if it is higher than your policy liability limits, and not other required coverage, like PIP coverage.

So, in the above example, if the person with the California auto insurance policy, driving in Oregon, skidded out and smashed into a parked car, doing $10,000 of damage to it, would have for the claim, instead of the $5,000 per accident Property Damage Liability limit under the driver’s California policy, the minimum $15,000 per accident Property Damage Liability limit required in Oregon. But if the driver was injured, the $15,000 medical payments per person, under the Oregon mandatory PIP coverage would NOT apply. An auto insurance claim for the driver’ injuries would depend on any coverage (such as optional medical payments coverage) provided by the California auto insurance policy, not the mandatory coverage required in Oregon.

Out-of-state auto insurance coverage can vary among companies, so shop for the coverage you need.

Although the most common (in my experience) out of state coverage clause in auto insurance policies applies only to state mandatory auto insurance liability coverage, some company policies may provide broader coverage. I checked one of my old car insurance policies (By the way, I take my own advice — I shop my auto insurance every year, and switch companies when I can improve coverage, service, or get a significant savings.), and it also provided other mandatory state coverage, if state law requires non-resident drivers to have it. The problem with this is other additional mandatory coverage, like PIP, may be required only of state residents. Still, this prior policy provided better coverage. If you have ever compared the wording of auto insurance policies from two different companies, they might read roughly the same (Sometimes they are identical, if the companies use the personal auto insurance policy form published be the Insurance Services Office(ISO)), but there are differences, which can be significant, depending on the circumstances of a claim.

Ideally, you want the broadest coverage possible. You may think you never drive out of state, but find your coverage lacking, when in the future, you’re in an accident driving a rental car, while visiting another state on a vacation or because of work, for a trip unanticipated when you were shopping for auto insurance. If you can find a company policy providing all out-of-state mandatory coverage, whether you are a non-resident or not, you should consider it, particularly if you frequently drive out of state.

However, as I have mentioned, it’s not hard to find an agent advising you their auto insurance policy covers all state mandatory coverage when driving out of state. Usually, they are incorrect, when you check the policy. How do you make sure your agent is advising you correctly? Have your agent read and show you the wording of your policy’s out-of-state coverage clause. If out of state auto insurance coverage is important to you, but your agent is unwilling to read you the wording of their auto insurance policy pertaining to it, it might be better to find an agent willing to accommodate you. Any agent refusing your request is either too arrogant, or too lazy to make sure you are getting the coverage you need, and does not deserve your business. An agent willing to double check things for you, by referring to the policy, even when they are sure they know the correct answer, is the sign of a conscientious agent.

Out-of-state auto insurance coverage may not apply if you have moved to another state.

If you move to another state, and establish a permanent address, you need to get the proper auto insurance for your new state of residence as soon as possible. Many states require you change over your license & registration, and have the proper state auto insurance coverage, within a certain period of time after moving, such as 30 or 60 days. Substantial fines can be imposed for non-compliance by the police. The out-of-state coverage provision in your auto insurance policy may no longer apply once you have established your new residence, so get the proper insurance ASAP.

If you are with an auto insurance company, also providing auto insurance in your new state of residence, you may be able to contact a local agent or the company, to have your policy from the former state cancelled, and transfer you to a new policy for your new state of residence.

WARNING: Many agents will tell you they will take care of transferring your auto insurance without giving you a price. Insist on getting a price before okaying the transfer. Your new car insurance rate may be much higher or uncompetitive with other companies. Some companies can take weeks (or months!) to process a transfer, and you may get an unpleasant surprise in your mailbox, that you are 5 weeks into a very expensive policy, and even if you change companies the day you get the huge bill, you still owe the much higher rate for the last 5 weeks of coverage.

Smart Auto Insurance Tip: Anytime you have a lifestyle change, like moving, you should shop your auto insurance, to make sure your new rate is competitive (This is one of the reasons why I recommend shopping each year, because it is easy to forget about insurance when you have a lifestyle change). If you are considering transferring your car insurance from your previous state, check the rates of the other major auto insurance companies first. Be sure to ask about the different coverage available or required for the two states. Get comparison quotes for the same level and options of coverage. Then contact an agent or the company about transferring your current policy, and find out the price. If the price is competitive, and you want to stay with the same company, okay the processing of the transfer, and write down the price you are told (have the insurance company send you the quote, if possible). When you receive your new policy, make sure it was issued at the price & coverage you were quoted.

If you make a permanent move to another state, you do need to get the proper auto insurance for the new state. But don’t let your insurance company or agent bully you into thinking you HAVE to transfer your policy. Your insurance company cannot transfer your policy without your permission, and you are free to switch to a new company, and cancel your old company’s policy from the state where you used to reside. If you move to a new state, and keep your auto insurance from your old state, your company will eventually cancel your policy, once the company knows your car(s) is being garaged in another state, usually at the policy renewal date, and you will get advance notice about it in the mail. But don’t be scared into thinking your coverage will be cancelled right away. You have time to shop, so you can make the best choice for you.

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