Do I Need Car Insurance Before Buying A Car?

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Jeff Bray
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Are you in the market for a new vehicle? Will this be your first or perhaps your twenty-first? In most cases, a new car is always exciting. The feeling of being behind the wheel, the smell of the interior, and the thrill of new ownership. There is always one more step, securing car insurance to protect your investment.

You want to have protection from the moment you drive off the lot. In my 9 years of auto insurance experience, I have assisted many drivers like you in assuring your vehicles are protected. Through this piece, I intend to help you determine if and when you need your next insurance policy before buying your next car.

Key Takeaways

  • Before driving off a car lot, a vehicle must have car insurance. Nearly all 50 states have insurance laws in place.

  • If you purchase a car, leave the lot, and then immediately get into an automobile accident, you may still be required to pay off your car depending on the insurance you purchase.

  • If you use your current vehicle as a trade-in, you may be able to temporarily use its policy to drive off the lot.

Do I Need Insurance To Buy A Car?

When shopping for a car, one important factor is the vehicle’s protection. Therefore, having plans for car insurance begins long before you pull into the dealership or make a phone call to the seller; you will need insurance to buy a car.

In all but two states, New Hampshire and Virginia, it is illegal to drive without car insurance. In fact, most auto dealerships will not allow you to leave the dealership without proof of auto insurance. They need to protect their investment and need assurance from you that you will as well. The task now is finding the best car insurance that meets the company’s demands and covers you while on the road.

Note: Full coverage in 2023 averaged $2,019. For 2024, it is on pace for an increase to an average annual cost of $2,160.

Can You Get Car Insurance Without A Car?

When contemplating purchasing a vehicle, you know insurance is a must. However, there are certain things you need to do to purchase an auto insurance policy. Details are important:

  • Year, make, and model. Miles your car has and any accident history.
  • Vehicle Identification Number (VIN). All cars, since 1981, have a unique 17-digit identification number.
  • Where you live and work. Your miles driving between the two as well as annual mileage will work into your monthly premium.

The reason the VIN is important is because it contains the vehicle’s history. If a car has an accident, received a ticket, or is listed as restored, the VIN gives that information. If you are purchasing from a private dealer, you can ask for the VIN for a better idea of your future insurance premium.

Tip: You can obtain a quote without a VIN if you have the cars year, make, and model. Understand your premium may increase when you submit the VIN to the insurance company.

How To Get Car Insurance Before Buying A Car

Car insurance is not standardized. You will find differences based on how much risk, or presumed risk, each company has faced in each of the above categories. Meaning if they feel you live in a high-risk area, or that you are an at-risk driver, they can charge you a higher rate. Thus, it is best to shop around and find the best rate.

First, insurance rates begin with the type of vehicle you purchase. A vehicle that is on a high theft list may cost more to insure than a lower-targeted vehicle. Read up before you make a payment. Next:

  1. Know your vehicle. Gather all the info about your car so you are not scrambling to find something during the process. As mentioned, your VIN and current mileage are important.
  2. Know how you use your car. One question car insurance companies ask is annual mileage. It is important to be accurate. If you are in an accident and the company investigates and determines you drive 30 miles to work when you said you drive 5, they may deny your claim.
  3. Know the expectations. Understand the minimum coverage your car company expects. Each state sets its own standards. If you are financing, you will most likely be required to carry full coverage.
  4. Know what is available. Shop around. Obtain an insurance quote from at least three different companies. Not all insurance providers are created equal. It’s also important to compare apples to apples. Ensure you are matching BI/PD and other riders should you include them.
  5. Know the process. The better prepared you are, the easier it will be to complete your application. Have all your information handy and ready to enter. Car company info, vehicle details such as mileage and VIN, and your driving history are important to have on hand for an accurate quote and quick turnaround.

Tip: Have your banking info handy so you can make your down payment. Autopay will often bring you a discount on your insurance before buying a car.

How Much Insurance Do I Need For A New Car?

Since car insurance is not standardized, state minimums have different coverage levels. All companies are required to cover Liability which is Bodily Injury and Property Damage. However, some states include Uninsured Motorists and Personal Injury Protection (PIP).

In addition, car insurance companies are not mandated to charge the same rates in each state. Here are a few examples of minimum coverages in various states:

State Liability Amount Uninsured Motorist Personal Injury Protection (PIP)
Alabama, Alaska, Georgia, Indiana, Mississippi, Ohio, RI, Tennessee, 25/50/25* Not required Not required
Connecticut, Illinois, Kansas, Missouri, Nebraska, South Dakota 25/50/25* 25/50** Not required
Maryland 30/60/15* 30/60** $2500
California 15/30/5* Not required Not required

*Bodily Injury per person/Bodily Injury per accident/Property per accident.

**Uninsured Motorist per person/per accident

Keep in mind these are Liability amounts only. If you’re purchasing a new vehicle, your financing company will most likely require full coverage. Let’s explain that for a moment.

Liability Only

This is basic coverage. It consists of Bodily Injury and Property Damage to the other party in the incident. Keep in mind this does not cover you or your vehicle. Also, be aware, if the damage exceeds your coverage, you are responsible out of pocket.

Uninsured Motorist (UM)

While not common, there may be times when a motorist will not be insured. This form of insurance will cover you for injuries suffered from an accident by an uninsured party. There is also a form of UM insurance that covers property damage.

Personal Injury Protection (PIP)

This insurance helps you and those in your vehicle who are injured during an auto incident. This pays regardless of who is at fault. It is only mandated in a few states, as we see here in Maryland.

Is There A Grace Period For Getting Insurance On A New Car?

When purchasing a new vehicle, you will often use your older car as a trade-in. While most of the time you will secure auto insurance on your new purchase, it is not always required. You can drive off the lot with essentially a promise to insure using your existing policy as coverage on your new car.

Most car insurance companies will give you a grace period of up to 30 days. This can be a benefit as well as a danger. A benefit in that you can avoid the immediate hassle of dealing with transferring your insurance policy. However, there are a couple of scenarios you must be aware of:

  • If your car is older and you have Liability Only, that coverage will not be enough to cover an accident before changing your policy.
  • If your car is stolen before you have the chance to upgrade your policy, then you only have the coverage your Liability policy affords you.

Note: In 2023, over 1 million vehicles were stolen nationwide. This number increased twelve thousand over 2022. This was primarily due to thieves learning how to bypass antitheft devices. Many car companies like Kia and Hyundai recalled vehicles to fix issues for companies to insure their vehicles.

Can You Transfer Car Insurance From Your Old Car If You’re Trading It In?

Transferring is possible and it may save you money by being company loyal. To transfer car insurance from a trade-in, simply contact your insurance agent with your new vehicle information and they will update your policy.

However, it is always wise to run a quote with another company. As we stated earlier, the base cost an insurance company charges can vary. An Insurify study showed 10.29% saved through switching car insurance companies. Also, sometimes insurance rates can increase for a municipality due to an increase in crime or another factor.

Getting Coverage If You’re Buying A Car Without A Trade-In

If you are buying a car without a trade-in, you will have to give the dealership a bit more than a signature and a promise to pay. First, you will most likely be required to make a higher down payment or qualify for greater financing. Second, you will need to show proof of insurance to drive your new car home.

Lending companies will still offer a grace period if you currently have auto insurance with other vehicles on the policy. However, if that coverage is lacking, for instance, Liability Only, you may be required to purchase additional coverage before leaving the dealership.

Getting Coverage If You’re A First-Time Car Buyer

It can be exciting and scary for a first-time car buyer; in that you are unsure of what comes next. There are so many decisions to make. You will need insurance before you can drive your new car home. When you purchase your new car, you can set up an insurance policy to start on the same day or on the day you pick up your new car.

You can also save money by shopping around. Not all insurance companies treat each driver equally. Some offer discounts. Here are some you can look for:

  • Safe Driver – If you have been driving for three to five years, and are driving incident-free, you can be considered for savings on your premium.
  • Student Discount – If you are under 25 and enrolled in an institution of higher education, maintaining a B average, you are eligible for a discount.
  • Low Mileage – If you live near your job you can qualify for a discount. This is typically a yearly mileage target.

Other discounts new drivers can find are paid in full, auto-pay, new car, and bundling where you bundle other policies such as renters or homeowners’ policies.

Key Stat: The good news is that a COX automotive study showed vehicle sticker prices have decreased 2.4% for 2024.

Can You Get Car Insurance The Same Day You Buy A Car?

Yes, you can get car insurance the same day you purchase your car. The more prepared you are going into a dealership, the easier the process. If you’ve done your shopping and know which car you want to purchase, talk to your insurance company and let them know of your intention to add a new vehicle. You can even walk in knowing how much your new premium will be.

There are some reasons why you may not get your insurance on the same day. These can be:

  • Not providing a VIN
  • Not providing a Driver’s License Number
  • Multiple moving violations.
  • You are obtaining insurance for a specialty vehicle.
  • Personal choice. You are electing to start your policy at a future date.

The Insurance Research Council (IRC) states that 14 percent of U.S. Drivers were uninsured in 2022. It is important once you purchase an automobile to get insurance immediately. Even one day uninsured can create a problem should you have an accident or event and attempt to file a claim.

 

FAQs

If buying a used car, when do you buy insurance?

It is best to purchase insurance for a used car before you take possession of the vehicle. You now own the car, and the previous owner is not responsible for anything that should happen to it.

How long do you have to get insurance after buying a new car?

Ideally, you should purchase car insurance before you drive away with the vehicle. However, you have a grace period to secure coverage. This can be between 7 and 30 days depending on the insurance company.

Can you get car insurance without a license?

Yes. Car insurance is connected to the vehicle, not the driver. However, to drive the vehicle one would need a valid driver’s license.

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