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UPDATED: Mar 13, 2020
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When you’re buying a new car, you need to prepare yourself for each stage of the car buying process before you even get to the showroom floor.
You should study interest rates, research vehicle models, and price the cost to insure the car of your dreams. As soon as you buy the car of your dreams, it’s your responsibility to buy insurance on it.
You can’t buy insurance on a car before you own it, but you can get everything to make processing your insurance application as easy as possible.
After you test drive multiple cars, haggle on the sales price, and battle the finance manager for a fair interest rate, the last thing you want to do is deal with an insurer. Here’s what you need to know about buying insurance on your new car.
Before you visit a dealer, compare insurance to make sure your rates are competitive. Enter your zip code in our FREE tool to get started!
Who insures a car during the test drive?
You can’t insure a car before you own it. If you read through your policy conditions, you must have an insurable interest in any car that you add to your insurance policy.
In the world of insurance, an insurable interest means that you would suffer financial loss if something were to happen to the property that’s being insured.
Even though you can’t add a car that you haven’t purchased on your policy, it’s important to verify a car has insurance before you take it for a spin — especially true when you are buying from a private party. If you are negligent during the test drive, and you crash the car, you want to know the owner has the policy to lean on.
In most cases, when you test drive inventory on a lot, the dealer will have you hand over your license for their insurance purposes. With the copy of your license, the dealer can file a claim on their commercial policy if there’s loss.
If you have a loss, and the other party tries to sue you, your current liability insurance will protect you. You should ask your agent if physical damage coverage extends.
You Need Coverage That Is Required Under State Law
When you are the owner of a registered vehicle, it’s your responsibility to buy car insurance. Every state has its own insurance laws, but even though the laws vary most states require liability coverage at a minimum. You should check to see what’s required under your state’s vehicle code before you register your car.
When you buy a car, how much insurance you’re required to purchase depends on how you buy the car. If you buy the car outright, you technically only need to buy what’s required by law. Anything else that you buy beyond the state requirements is considered optional. Here are standard state coverage requirements:
- Bodily Injury – Pays for third-party medical bills, disability income, and rehabilitation costs when you or a driver in your home is at fault for the accident
- Property Damage – Pays for the repair or replacement of property owned by someone else
- Personal Injury Protection – Pays for your medical bills and loss of income when you’re in an auto-related accident. This coverage is only required in states with a no-fault insurance system
What happens if you’re leasing or financing your new car?
Financing or leasing a car will affect how much insurance you must immediately buy after you buy a car. Since lenders and lessors require you to insure the property on the loan, you must buy full coverage as soon as the contract is signed. In fact, at the dealership, you have to prove that you have full coverage before you can leave with your car.
Do you have automatic coverage after you buy a car?
If you currently own a car, and you have an insurance policy, the coverage on the policy will extend to your new car for a limited period. Under your standard insurance policy, this coverage extension is called a newly acquired vehicle provision. It does exist, but you should be aware of the limitations.
For coverage to extend, you must be a named insured or additional named insured on the policy. It’s also important to know that you must be buying a private passenger vehicle, and you must be the registered owner.
If the new car qualifies, it will receive the broadest coverage on your policy for 14 to 30 days, depending on what your policy says.
What if you don’t have full coverage?
If you don’t have full coverage on your policy, and you need it on the new car, your new policy will give you four days of automatic comprehensive and collision insurance. The company will assign $500 deductibles, which gives you time to call your agent and add the car if you buy it over the weekend when the offices are closed.
Car buyers who don’t already have car insurance need to buy a policy right away.
If you want to make it an easier task, you can request quotes before you start test driving cars to help you determine how much a car will cost to own before you start haggling.
It will also make it easier to buy a policy after you sign on the dotted line.
Use our FREE online quoting tool, compare rates from company to company, and be prepared before you shop. Enter your zip code to get started!