When Do You Need to Buy Insurance for a New Car?

Auto insurance is required in every state across the U.S., and there are serious consequences for driving uninsured. The big question, though, is how long do you have to get insurance after buying a new car?

Answering that question can be more complicated than you'd think since the answer depends on who you're buying the car from.

Most dealers require insurance before you take the car off the lot. If you're buying from a private party, however, you may be able to wait to notify your insurer because you have a short grace period. Still, just because you can wait doesn't mean you should.

Here's why it's best to act quickly to get covered as soon as you get the keys to a new car.

Key takeaways

• Car dealers usually require you to provide proof of insurance before leaving the lot.
• When you add a new car to an existing policy, you may have a short grace period.
• Purchasing insurance coverage immediately for a new car will protect you from financial loss.

How long do you have to get insurance for your new car?

Most states require a minimum of liability insurance coverage, and some also require personal injury protection (PIP) coverage and uninsured motorist coverage. In addition to the state requirements, if you are financing or leasing the car, your lender will have their own rules for what kinds of insurance to buy. Usually, this includes collision, comprehensive, and gap insurance coverage.

Car dealers typically require you to have all of these different kinds of required coverage before you leave the lot, especially if you're financing or leasing the vehicle through the dealership.

When I've purchased cars in the past, I've often called my insurance agent right from the dealership to get the new car added to my policy. This can usually be done in minutes, and the insurance agent can provide instant proof of insurance delivered digitally. Of course, you may also want to compare car insurance prices for your new car before you buy to get the best deal.

If you're buying from a private individual, they probably won't have these requirements. However, states usually won't allow you to register the car without proof that you meet minimum insurance requirements. Depending on the state, you may have a maximum of 30 to 90 days to register the car, but it usually must be registered before you drive it.

New car insurance grace period

If you have an existing car insurance policy, you can add your car to your current insurance, but you'll need to notify your insurance company that you are doing so and provide information about the new vehicle.

Some insurers will automatically cover the new car for a short period of time even before you officially add it to the policy. This period of time is called a “grace period.”

During your grace period, you'll have the same coverage and policy limits that you had before buying the new vehicle. If the new car is worth more than your policy limit and something goes wrong, the insurer only pays up to that limit.

The length of the grace period, and whether a grace period exists at all, varies by insurer. However, it is usually around seven to 30 days.

Remember, even if your insurer has a grace period, the dealer won't let you wait. You also take a risk of not being fully covered if you don't get new coverage right away.

Insurance requirements for new cars

When you buy insurance for your vehicle, you may need to purchase more than one type of coverage. As mentioned above, certain kinds of coverage are required by the state and certain kinds of insurance are required by lenders or lease providers.

The best car insurance companies offer all these types of car insurance coverage at an affordable cost. Here are some of the different kinds of coverage you may need.

Comprehensive coverage

Comprehensive coverage pays for problems with your vehicle that do not occur because of a collision. This could include anything from vandalism to hail to car theft to a tree falling on the car. Comprehensive coverage usually also includes windshield damage.

You are not required by your state to buy this kind of protection, but you may be required to purchase comprehensive coverage if you have a car lease or loan.

Collision coverage

Collision coverage pays for problems that happen because of a crash that was not the fault of another driver. This can include situations where you get into an accident with another driver but also single-car accidents, like if you hit a telephone pole or an animal.

You are usually not required to buy collision coverage by your state, but you will be required to purchase this protection if you have a car loan or lease. Collision coverage can pay for repairs or pay you the full market value of your car if the vehicle is declared a total loss.

Liability coverage

Liability coverage is required by law in most states throughout the United States. This includes:

• Bodily injury liability: pays for physical injuries you cause others if you are responsible for a car accident
• Property damage liability: pays for damage you cause to the property of others, such as their car or buildings or other structures

Typically, states establish a minimum amount of coverage you must buy, such as $25,000 per person and $50,000 per accident in bodily injury liability coverage. There's usually also a minimum coverage requirement for property damage such as $5,000 or $25,000.

You may want to buy more than the minimum required coverage, as the minimums are often very low given the extent of the damage you could cause in an accident.

Personal injury

Personal injury protection, or PIP coverage, is required in a minority of states. When you buy PIP coverage, you must turn to your own insurer to provide payment after a crash causes minor damage, regardless of who was at fault.

In PIP states, you can only sue a driver who caused a crash if your injuries are severe enough to allow you to opt out of using your own PIP insurance.

Uninsured/underinsured motorist coverage

Sometimes, drivers don't have enough insurance or do not have any insurance at all, even though states require it. This puts motorists at risk of uncovered loss if they get into an accident with a driver who doesn't have the right protections in place.

Uninsured or underinsured motorist coverage (UI/UIM) provides protection in case the policyholder is involved in an accident with one of these uninsured drivers. The policyholder's UI/UIM insurance will pay for the losses the other motorist should have covered.

Some states require drivers to buy uninsured or underinsured motorist coverage or mandate that insurers offer this coverage by default unless the policyholder opts out in writing.

Buying vs. leasing

Drivers who lease vehicles or who have car loans are often subject to additional insurance coverage requirements compared with those who buy a vehicle outright. Loan and lease providers usually require both collision and comprehensive coverage to protect the vehicle, which serves as collateral for the loan.

It's also common for lenders and lease providers to require GAP insurance. This pays the difference between the market value of the car and the outstanding amount owed on the vehicle if it is totaled. This is important because often a vehicle that is leased or that is used as collateral for a car loan is worth less than the remaining balance due.

Drivers should make sure they understand the rules for coverage put in place by their loan or lease provider.

FAQs

Bottom line

When you get a new car, your best option is to buy insurance right away, even if your dealer doesn't require it and even if your insurer provides a grace period. Buying the right insurance will provide important protection for your vehicle and help ensure that your new car is fully covered if something goes wrong.

The good news is, you can shop for insurance before you buy a car, so you don't even have to wait until the vehicle is officially yours to find the right coverage. Comparing the best car insurance companies early can help you get your car covered from day one.