Automatic coverage is a term applied to insurance coverage that covers an increase in value for a property. The reason for the increase in value might be because it appreciates, or it might be a newly-purchased piece of property. This is most often used in real estate and automobile coverage, but for different reasons. While this type of coverage is a benefit to the policyholder, it will eventually come with increased costs, and the policyholder may not be without some responsibility.
For many individuals, automatic coverage is often used when they go to purchase new vehicles. If they have an existing policy, the purchase of a new vehicle will be covered under that policy for a certain period of time, even if the vehicle is of better value than the one currently insured. Within days of the purchase, the policyholder is expected to add the vehicle to the coverage or risk losing the automatic coverage. The time given to do this varies but jurisdiction, but generally lasts anywhere from a few days up to a month.
Convenience is the biggest benefit in this type of situation. It allows customers to drive the vehicle off the lot without having to go through the hassle of getting insurance coverage prior to the purchase. Therefore, this can be especially helpful if an individual is shopping for a vehicle, but doesn't know what specific vehicle they may be purchasing. In some cases, it may be necessary to add comprehensive and collision coverage to the current policy, if those are not already on the policy.
Real estate is another area where automatic coverage is often utilized. If a property appreciates in value, the insurance will also cover that increase in value. The insurance company may have a company perform an appraisal every so often in order to make sure the coverage is adequate. Those who have questions about the proper value can also have their own appraisal done, but that should be by a company or individual certified in such actions.
The terms of automatic coverage could also apply if there is a depreciation in property for any given reason. Often, for example, a vehicle depreciates as it gets older, thus leading to less risk to the insurance company when it comes to a replacement cost. Therefore, an older vehicle is generally less expensive to insure and the premium savings is passed onto the owner. The price of the property may be determined by several factors including location, condition, and past history.
