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Do You Need Insurance Before You Buy a Car? It Depends

All drivers need car insurance to drive any car on the road, including a new car. But there is a way to drive off the lot with your new car and your existing car insurance.

Updated Aug. 21, 2024
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Buying a car is stressful enough, and then you must worry about car insurance. It almost seems cruel.

To make it easier on yourself, I suggest ironing out insurance details before heading to a car dealership. If you don’t, you must figure out your insurance situation while you’re in the finance office hashing out the details of the deal.

The good news is that the process is much easier if you already have an existing policy. If not, you’ll need proper insurance before you can get behind the wheel. To ensure your vehicle has the necessary protection, here's what you must know.

In this article

Do you need insurance before you buy a car?

Before you can drive a vehicle off the lot at the dealership, you must have insurance. In fact, dealerships typically require you to provide proof of insurance before you can take your new car home. While it sounds annoying or like another stress to consider, it’s for your own financial protection. If you cause an accident on the way home, you’d be responsible for all the costs, plus you’d likely violate your state laws and the terms of your loan contract.

New Hampshire and Virginia are the only states that don’t require minimum car insurance coverage limits. All other states require car owners to have at least some liability insurance coverage.

If you live in New Hampshire or Virginia, you must:

  • New Hampshire: Demonstrate that you have enough funds to meet the state's financial responsibility requirements if you cause an accident.
  • Virginia: Pay a $500 fee when registering your vehicle and pay it again yearly when you renew it. You’re also responsible for any bodily injuries or property damage you may cause in an accident.

In addition to liability insurance coverage, some states require you to carry some or all of the following types of coverage:

  • Uninsured and underinsured motorist coverage
  • Personal injury protection (PIP for short)
  • Medical payments coverage

Your loan contract may also require you to purchase collision and comprehensive coverage. 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 a vehicle you currently own, even if you’re trading it in, you meet the necessary requirements to drive the car off the lot.

Most insurance carriers automatically cover the brand new car at the same level as the other vehicles on your current policy. However, there is a limited time grace period usually between seven and 30 days to update your policy to include the new car.

I suggest calling your insurance company as soon as you arrive home with your new vehicle. You may also be able to switch the coverage online. You’ll need the details of your new vehicle, as well as to inform the insurance company if you no longer own a previously insured car.

How to insure a new car if you do not have an existing policy

If you don't have an existing auto insurance policy, you can’t drive the car off the lot until you have proper coverage.

Here’s what I suggest:

  • Contact a few auto insurance companies and start the quote process
  • Provide details about yourself (name, address, birthdate, driver’s license number, and Social Security number)
  • Provide details about the proposed vehicles you’re considering
  • Choose the insurance company with the most robust coverage and affordable premiums

When you’re finalizing the details of the sale, update the insurance company with any details, including the car’s VIN, and you’ll have insurance before you leave the finance office.

Tip
Pro tip: 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.

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Tips to save on your auto insurance coverage

Auto insurance is required by law (in most states) and protects you financially, but that doesn’t mean you must overspend. Here are some tips to save money on your car insurance coverage:

  • Start early. Don’t wait until you’re at the dealership to shop around for car insurance. Start the process before shopping for cars. The quotes may help you narrow your options based on the cost of the premiums. Plus, it reduces the stress of buying a vehicle.
  • Shop around. It's crucial to compare coverage from multiple insurance carriers before you settle on a policy. Shop with the best car insurance companies to compare offers side by side.
  • 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, and life insurance.
  • 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 with a clean record. If you do get a ticket 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. I suggest you don't skimp 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. Also, if you have comprehensive 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 file a claim.
  • Look for discounts. Auto insurance companies typically offer 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 as one of the factors that affects car insurance rates. If you have a high credit score, you're statistically less likely to file an insurance claim, which could mean a lower premium.

FAQs

Can I buy insurance before buying a car?

You can’t buy insurance before buying a car, but you can get quotes on the cars you’re considering. 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. However, you must add the new car to the policy as soon as possible to avoid exceeding the grace period.

If you don't have an insurance policy in place, you must 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 and then adding the specific vehicle details once you know them.

Can you drive a 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 must 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 must 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 typically submit the information about the sale to the Department of Motor Vehicles in your state.

Do car dealerships offer temporary insurance?

Most major insurance companies do not offer temporary insurance. If a dealership offers this option, research it carefully, as it may not be the full coverage you assumed. Instead, you’re better off purchasing a 6-month policy from a reputable insurance company and shopping around for a better deal before renewal.

Bottom line

You need car insurance before you buy a car, but if you have an existing policy, you have more time to finalize the details. If not, I suggest doing the legwork before looking at cars so you know what insurance will cost and you have the process started.

You’ll typically find better deals shopping for car insurance yourself, rather than accepting suggestions from the dealer. Plus, having the majority of the work done ahead of time makes the car buying process much less stressful.

  • You could save up to $600 with some companies
  • Compare dozens of providers in under 5 minutes
  • Fast, free and easy way to shop for insurance
  • Quickly find the perfect rate for you

Author Details

Ben Luthi

Ben is a personal finance and travel writer who loves helping people achieve their money goals. Along with FinanceBuzz, his writing has also been featured on U.S. News, NerdWallet, Experian, Credit Karma, and more.

Author Details

Samantha Hawrylack

Samantha Hawrylack is a writer with more than five years of experience. Her work has been published in Newsweek, MarketWatch, USA Today, Rocket Mortgage, BiggerPockets, Crediful, and many more. She holds a Bachelor of Science in Finance and a Master of Business Administration from West Chester University of Pennsylvania, and she was previously a brokerage investment professional with Series 7 and 63 licenses at Vanguard.