If you're shopping for a new vehicle, you may be wondering whether you need insurance in place before you buy the vehicle or if you can add it to your policy once you return from the dealership.
The answer depends on whether you already have a policy in place. To make sure your new vehicle has the protection it needs, here's what you need to know.
Do you need insurance before you buy a car?
In order to drive a vehicle off the lot at the dealership, you'll need to have insurance in place for the car. In fact, dealerships will typically require you to provide proof of insurance before you can take your new car home. If you don't have coverage and cause an accident on the way home, you'll not only be on the hook for all the costs yourself, but you may also be violating state law and your loan contract.
Almost every state requires car owners to have at least some liability insurance coverage, but the limits can vary by state. New Hampshire and Virginia are the only states that don't require coverage. However, if you want to drive in New Hampshire, you must demonstrate that you have enough funds to meet the state's financial responsibility requirements in the event that you do cause an accident.
In Virginia, you can choose to drive uninsured, but you’ll need to pay a $500 fee when you register your vehicle and pay it again each year when you renew it. On top of that, you'll be responsible for paying for any bodily injuries or property damage that you may cause in the event of an accident.
Some states also require you to carry uninsured and underinsured motorist coverage, personal injury protection (PIP for short), or medical payments coverage. As a result, you'll want to check with your state's insurance commission to find out what's required of you.
In addition to minimum state requirements, you may also need to purchase collision and comprehensive coverage if you financed your vehicle purchase. Many lenders require these to protect their interest in the vehicle.
How to insure a new car if you have an existing insurance policy
If you already have an auto insurance policy on the vehicle you're trading into the dealership or on another car parked at your home, you don't have to worry about including the vehicle on your policy before you leave the dealership.
In general, insurance carriers will automatically cover the brand new car at the same level as the other vehicles on your current policy. You'll typically have a grace period between seven and 30 days to update your policy to include the new car.
To do that, you can log into your online account and update the policy with the details of your new ride, or you can contact your insurance agent or the insurance carrier directly to complete the process. If you sold another car that was on the policy, you'll want to make sure to remove that so you're not paying for coverage on a vehicle you no longer own.
How to insure a new car if you do not have an existing policy
If you don't have an existing auto insurance policy in place, you'll need to purchase coverage before you can leave the dealership with your new car. Unlike the situation where you have a policy, there is no grace period if you don’t have an existing policy.
The good news is that you can start the process of buying insurance before you get to the dealership. You'll start by providing information about yourself, such as your name, address, birthday, driver's license number, and Social Security number.
If you already know what make and model you want to buy, you can add that to your quote request, and you should be able to get a quote based on that vehicle. Once you know exactly which car you want to buy, you can update your application with its vehicle identification number and submit it with that date as the policy's effective date.
Also, if you already know which vehicle you're planning to buy before you make the decision, ask the seller or the dealer to provide the VIN, and you can set up your policy to start on the day of the purchase.
Tips to save on your auto insurance coverage
The sooner you start shopping for auto insurance coverage the better. If you're trying to find a policy the day of the purchase, you'll have a harder time comparing rates from multiple insurance providers and may end up with one that's unnecessarily expensive.
Here are some tips to help you save on your insurance coverage:
- Shop around. It's crucial to compare coverage from multiple insurance carriers before you settle on a policy. To save time, FinanceBuzz lets you compare quotes from the best car insurance companies in one place. That way, you can compare them side by side without needing to submit multiple applications.
- Bundle your coverage. If you also have a homeowners or renters insurance policy, you might qualify for a discount on your auto policy by bundling it through the same insurance company. The same can go for motorcycle insurance, boat insurance, RV insurance, life insurance, and more.
- Maintain a safe driving record. Your driving habits are a significant factor in your insurance premiums because someone with at-fault accidents and moving violations in the recent past might be more likely to file claims than someone who has a clean record. If you do get ticketed for a moving violation, check with your local police department or court to see whether you can have the ticket removed from your record in exchange for attending traffic school.
- Opt for a higher deductible or lower coverage. You want to make sure you don't skimp too much on coverage, but if you want to save money, you could avoid getting the maximum liability protection or skip optional coverages like rental car reimbursement and roadside assistance entirely. Also, if you have comprehensive coverage and collision coverage, opting for a higher deductible could result in a lower premium. Just be sure you can afford the car insurance deductible if you do end up filing a claim.
- Look for discounts. Auto insurance companies typically offer a variety of discounts to incentivize people to buy a policy. With each insurer, take your time to find out which discounts they offer and whether you qualify. The more discounts you can get, the less you'll pay.
- Improve your credit. In several states, insurers use a credit-based insurance score to help determine your car insurance costs. If you have a high credit score, you're statistically less likely to file an insurance claim, which could mean a lower premium.
As we researched car insurance coverage, we came across several common questions from people on the matter. As you get ready to buy your next car, here's what you need to know.
How soon after buying a car do you need insurance?
Your vehicle must be insured before you drive it off the dealership lot. If you drive uninsured and you're caught, you could have your license suspended, and you may even be fined.
The good news is that if you already have an auto insurance policy, your new vehicle will be covered under the policy at the same level as your existing vehicles. Just make sure you add the new car to the policy as soon as possible to avoid having that grace period lapse.
If you don't have an insurance policy in place, you'll need to arrange to have the vehicle insured before you drive it home. You can do this by providing as much information as you have before you buy, then adding the specific vehicle details once you know them.
Can you drive a used car home without insurance?
No, in most states, you can't drive a new or used car home without insurance in place on the vehicle. The only exceptions are New Hampshire and Virginia, but you'll need to meet other criteria to have the liability insurance requirement waived.
If you don't have coverage and drive home, you could face stiff penalties if you're caught. In other words, make sure you include the cost of insurance in your calculation for how much car you can afford so you have enough money in your budget to pay for a policy.
Do car dealerships verify insurance?
Yes, before you complete the contract, the dealership will ask you to verify that you have car insurance. Again, if you don't, you'll need to set up an insurance policy with the purchase date as the effective date to make sure it's covered as you drive home.
Dealerships do this because they're the ones that typically submit the information about the sale to the Department of Motor Vehicles in your state.
Do car dealerships offer temporary insurance
Depending on the dealer, they may be able to help you set up a temporary insurance policy for your vehicle. This is often called drive-away insurance because it provides coverage long enough for you to drive home and get a permanent car insurance policy in place.
Depending on the insurance company the dealership works with, you may be able to get coverage on an hourly basis, for a day, or for up to four weeks.
Before you do this, though, take a look at what the policy would cost you and compare it to what you'd pay if you were to buy a permanent policy from the get-go.
The bottom line
As you prepare for your next vehicle purchase, create a plan to make sure you'll have insurance coverage in place. If you already have an auto policy, you can take care of updating your policy after the fact. But if you don't have insurance coverage right now, you'll want to start the process before you head to the dealership.
In some cases, you may be able to buy temporary coverage, but check with the dealership beforehand and consider getting quotes for a permanent policy anyway so you can determine whether the cost of a drive-away policy is worth it.
FinanceBuzz can help you compare car insurance quotes from top insurers quickly and easily. If you need coverage, start here to find the best car insurance for you.