In most states, car dealerships won’t allow you to drive off the lot before you show proof of car insurance for your new vehicle. And for good reason — car insurance is required in nearly all states. Also, no dealer wants to be blamed if you total your new car five miles down the road and wind up making payments on a car you no longer can drive.
When to get insurance on a new car
If you already have car insurance for your current vehicle, then your existing policy may offer temporary coverage for your new car for a limited time. If you’re not certain if your policy extends coverage, give your agent a quick call to check before picking up your new vehicle.
If your current car insurance policy does automatically extend coverage to a new car, you won’t be required to inform your auto insurance company before buying a car, but don’t wait too long after your purchase to notify your insurer.
Policies that extend coverage to new cars typically give you anywhere from seven to 30 days to inform your car insurance company that you purchased a new vehicle. It’s important that you know exactly how long you have and inform your insurer about your new car within this grace period. Otherwise, you could unknowingly end up driving without insurance.
Be sure to find out if your extended coverage includes collision and comprehensive. If it doesn’t, your finance or leasing company will require you to add these physical damage coverages to your new car policy immediately.
If you don’t have a policy already in place, get car insurance quotes while you’re still shopping for a car and make sure you compare insurance rates by car model. You don’t want to be in the middle of purchasing your new vehicle and discover you can’t afford the insurance on it.
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Insurance when buying a new car
Some car insurance policies only cover a new vehicle if it’s replacing a vehicle on your policy and only extend the same coverage. For instance, if you only had liability insurance for your old car, your new car will only have liability coverage. If you find this to be the case, call and add the new car to your policy while at the dealership to have collision and comprehensive coverage in place before you drive off the lot.
Other auto insurance companies’ policy terms automatically provide a new car with comprehensive and collision for only a few days, two to four is common, if all the vehicles on your policy have liability only coverage.
That limited coverage window allows you to get home and call the insurer, which is especially helpful if you’re buying a car during the weekend and your agent isn’t available for you to add your new vehicle to your policy.
Other auto policies extend the physical damage coverage for a longer period of time if you have these coverages on at least one of the other cars on your policy.
Rules are all over the place with car insurance companies, and can also vary according to state laws. For instance, in Texas, insurance companies must give a newly obtained vehicle the same amount of coverage as your car with the most coverage. That means if you have one car with collision and comprehensive and a second car with liability and then you add a third car, it will have collision and comprehensive extended to it.
But, in Texas, if you’re replacing a car on your policy you’re extended only the same coverage as the car the new car is replacing. And any new automatic coverage in Texas only lasts up to 30 days so during that time you must inform your insurer of the new car and decide what exact coverages you want on it.
Whatever your extension period is, if you wait past the deadline to notify your insurance company you will lose coverage on the new vehicle. This could get you in trouble with your state department of motor vehicles and your finance company, not to mention bring about major financial difficulties if you get in an accident.
Know your auto insurance options
If you’re buying your first car, you need to shop around and get a car insurance policy lined up before you buy your new auto. That usually means you’ll need to call from the dealership to formally start the policy by providing the insurer the vehicle identification number.
If you’re already insured and the dealer asks to see proof of insurance before you can burn rubber, show your current insurance card if you know there is automatic coverage. The dealer should accept that as proof. If you’re asked to provide something more, most car insurance providers can email or fax proof. Your car insurance company may have a phone app that will let you show this information, check into that as well.
Keep in mind if you’re leasing a vehicle you may need to upgrade your coverage — leasing companies require you carry higher liability limits of $100,000/$300,000 for bodily injury and $50,000 for property damage. Typically, your insurer can get you the coverage you need within 24 hours.
If it’s time to shop for auto insurance, Insure.com provides a list of the best car insurance companies as ranked by policyholders.
Car Insurance for a New Vehicle
You have many considerations to make when buying a new car. Insurance is just one of them.
Whether you switch to a new auto insurance provider or transfer your existing insurance to your new car, ensuring that you have the right car insurance is an essential part of the process of purchasing a new vehicle.
Getting a Quote Before You Buy
The type of vehicle you drive has an effect on your car insurance rates, so getting a quote for the type(s) of cars you are considering can be a wise choice.
First, if you’re choosing between multiple vehicle types, getting quotes can help you make your decision (e.g., if one type will be much costlier to insure, you may choose the other).
Second, whenever you’re buying a new car, you need to reevaluate your coverage:
Your current provider may no longer be the most affordable provider for car insurance coverage you’ll need for your new vehicle.
Also, other providers may have additional products and offerings that better suit your new needs.
Finally, it’s smart to periodically check for car insurance quotes. You may be paying more than you need to if you’ve stayed with the same company for years without looking around at prices and discounts offered in the market.
Before you buy your new car, get at least 3-4 car insurance quotes for the type of vehicle you’re looking to buy so you’ll know what to expect.
What You’ll Need to Drive Your Car Off the Lot
Driving without car insurance coverage is illegal, so you’ll need to make sure you are covered before you drive your new car off the lot.
If you already have car insurance, you may need to adjust your coverage for your new vehicle. For example, you might be required to add comprehensive or collision coverage if you are taking out a loan on the car.
However, even if you need to adjust your insurance for your new car, your current policy may cover you for a short period of time after the purchase of a new vehicle.
Check your declarations page to be sure.
If you’re unsure whether you’ll be covered, provide the vehicle information to your car insurance company before you complete the purchase. Your agent should be able to let you know what you’ll need.
If you’ll be changing companies, make sure to find out exactly how long your current car insurance will extend, and make sure you have an exact start date for your new policy and end date for your old policy. For more information, please see our page on switching car insurance companies.
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Notifying Your Insurance Company
If you are going to transfer your current car insurance from your old vehicle to your new one, or are planning to switch to a new provider altogether, it’s your responsibility to alert your insurance company.
Do not assume you are covered if you do not make a call.
It is a good idea to call your car insurance company before you buy your new car, if possible. This will ensure you know exactly how you’ll need to move forward with your insurance before you even drive your car off the lot.
The Benefits of Gap Coverage
Once you drive a car off the lot, the actual cash value depreciates significantly. If you’re going to have a loan or lease on your new ride, you can protect yourself financially by opting for gap coverage.
Gap coverage takes into account the dangers of depreciation and covers the difference between your loan amount and the car’s actual cash value if it was totaled in a crash.
This ensures you are not left with a large car loan bill and no car, if your vehicle is totaled in a serious accident.
If your current company does not offer gap coverage, you may wish to look around at other options in the market to make sure you have financial protection.
To learn more about this type of car insurance coverage, visit our Gap Coverage page.
Car Insurance Premiums
When you transfer car insurance to a new car from your existing car, don’t be surprised if your insurance premiums change.
They may increase if the vehicle is more costly to repair or represents a greater risk to the insurance company.
Examples include sports cars and luxury vehicles.
They may decrease if the vehicle is cheaper to repair or presents a lower risk.
Examples include affordable cars and those with many safety features.
If you are looking to save money on insurance, hybrid vehicles may be a good choice. Several insurance providers are now offering lowered rates on hybrid vehicles in an attempt to encourage more people to «go green.»
Whichever vehicle you’re considering, getting multiple car insurance quotes will give you a good idea of the rate ranges you can expect.
If you plan on keeping your current vehicle, adding a new car to your current policy may be a way to help you save money.
Most car insurance companies offer multivehicle discounts, which lower the cost of additional vehicles added to the policy. Talk to your current auto insurance agent about the availability of this discount type.
Remember, auto insurance is a crucial part of the puzzle when purchasing a new car. It is essential to do your due diligence to avoid any unwanted surprises – such as higher premiums – later.