Q: If an insured requests to remove a vehicle from their personal auto policy on the day it was sold, is it recommended that the change be made effective that same day or the day after? Also, does the 12:01 a.m. effective date impact change requests like they do cancellations?

Response 1: First, I'd like to answer a question that was not asked. From a claims point of view, if the insured removes a car, coverage for a "replacement" or "substitute" vehicle is also removed. Therefore, before a vehicle is removed, it would be wise to make sure a new vehicle is covered. If the new car is in an accident, and the original vehicle for which it is a substitute or replacement doesn't have coverage, there is no coverage. 

Second, from a claims point of view, coverage can end and begin at any time. We can begin coverage at 4:39 a.m. if we want. However, from a standard aspect, coverage usually stays in effect until midnight on the final day of the policy and begins at 12:01 a.m. the next day. So, it seems to me that it really doesn't matter if you sold the vehicle on Monday at 3:30 p.m. and ended coverage on Tuesday at 12:00 a.m., or if you sold the vehicle on Monday at 3:30 p.m. and ended coverage on Tuesday at 12:01 a.m.

What you don't want to do is end coverage on Monday at 12:01 a.m. if the insured sells the car later that afternoon on Monday. 

Response 2: I believe dating the change for tomorrow is the correct answer. Their exposure will end at the time of day that their insurable interest ends. You would include the full day for the endorsement to verify that you have coverage in place until the transaction closes. 

In practice, insurers often process with the effective date of the transaction as the change date for deletion. If you are clear with the underwriter that the transaction is closing during the day—probably not at 12:01 a.m.—your insured should be protected. I don't believe any commissioner of insurance or judge would support a denial because the insurer had clear information and chose to process the change one day earlier. 

Response 3: Because the insured owned the vehicle for part of the day, we recommend the next day for removal. And we ask our clients to immediately file a Department of Motor Vehicles (DMV) notice of transfer and release of liability.

There have been situations where the buyer drives off with the vehicle and immediately gets into an accident, and then the seller is sued. If the title has not been transferred and the DMV release has not been filed, the claim and legal process is complicated.

Response 4: It's difficult for me to imagine an insurance company turning down a claim on that basis, but if you're concerned, you should specify the time of termination on your requests. There's a time of day specified in the policy for the beginning and end of the contract, but I don't think it is extended to coverage changes—either additions or deletions. 

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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