Do You Have to Have Car Insurance to Buy a Car?
Buying a car is a big deal. There are a lot of things for first-time buyers and older drives alike to worry about: passing your driver’s test, taking out a car loan, and negotiating with the car dealer for the best deal. Do you need insurance before you buy a car as well?
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Do I Need Insurance Before I Buy a Car?
Do you need insurance before you buy a new car? The simple answer is yes. First of all, it’s wise to have insurance just in case something happens shortly after you buy your car. Getting into an accident without car insurance is one of the worst things that can happen to you financially.
Second, it is actually illegal to drive a vehicle without insurance. The exact requirements about what kind and how much coverage you need vary from state to state, but you should always expect to have some baseline of coverage before you buy a car. Either an old policy with your new information or an entirely new car insurance plan will do.
If You Have an Old Policy
If you already have an insurance policy, then it primarily covers your old vehicle at the moment. Insurance coverage is specific to a particular vehicle, so your car insurance rate can actually go up or down depending on what kind of car you buy, whether you make it your new primary, or add it to an old policy.
If you have an insurance policy and you’re planning on buying a new vehicle, be sure to communicate with your insurance provider or agent about your plans. Your current policy may include a stipulation to cover a new purchase right out of the lot. However, you may not have any coverage until the new vehicle is added to your policy. In this case, try to find a car that you like ahead of time and add that car to your policy before finalizing the purchase.
If You Don’t Have Any Auto Insurance
You are required by law to have car insurance if you own and operate a vehicle at all, so if you’re buying your first car, this is the perfect time to make sure that you are insured. There are a few ways that you can buy insurance for the first time:
- Contact an insurance company. Insurance companies will sell you a policy directly if you know what you’re looking for.
- Work with an insurance broker. Insurance brokers come in two types: captive and independent. Captive agents work with just one insurance provider and they can help you bundle your car insurance with other policies for things like homes and boats. Independent agents can help you shop around for the provider that best suits your needs.
- Compare rates online. Third-party websites will allow you to compare and contrast policies from different insurance providers. This is a good way to go if you know what you want in a policy and you want to get the best possible price.
If you’re shopping for insurance and a car at the same time, communicate with the dealers that you see. They may be able to connect you with a trustworthy agent or company who can make sure that your new car is insured the moment that you drive it off the lot.
New Car Insurance Grace Period
Depending on your existing policy, you might not need insurance right away when you buy a new car. If your insurance includes a grace period, you will have a set number of time — at least a few days — to contact your insurance agent or provider and get the new vehicle added to your policy.
If You Buy a Replacement Vehicle
There are many reasons why someone might buy a new car. If you’re getting a new car because your old one has stopped working, or you’re just ready for an upgrade, make sure that you contact your insurance provider or agent to have your old car removed from you policy. If you have both cars on your policy, but you’re only using one, then you’re paying for insurance that you’re not using.
If You Buy an Additional Vehicle
On the other hand, if you’re adding another vehicle to your current lineup, make sure that your insurance does not accidentally remove your original car from your policy. Your insurance rate will go up with a new car on your policy, but you’re legally required to have insurance for every car that you own.
Since your insurance premium will go up when you add a new vehicle, this can be a good time to negotiate with your insurance provider for discounts or consider shopping around for a provider who can give you a better deal.
You must have an insurance policy when you buy a new car. If you have an existing policy, then you may have a grace period during which your insurance will cover your new car while you get the paperwork in order. If this is your first time, both dealers and insurance companies will work with you to ensure you have the coverage you need before you drive off in your new car. The more research you do ahead of time, the better deal you can get on both the vehicle and the auto insurance.
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Nick Cesare is a writer from Boise, ID. In his free time he enjoys rock climbing and making avocado toast.
This post was updated May 8, 2018. It was originally published April 17, 2018.