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Written byLindsay Frankel
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Lindsay Frankel is a personal finance and insurance writer who’s been writing for Compare.com since 2023. Her work has been featured in publications such as Investopedia, LendingTree, The Balance, SFGate, Bankrate, and FinanceBuzz.
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Edited byLequita Westbrooks
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Lequita WestbrooksSenior Editor
Lequita Westbrooks is an insurance editor at Compare.com. Her writing and editing experiences span several industries, including insurance, personal finance, higher education, and more. She excels at explaining complex topics like auto insurance in simple, easy-to-understand language and is passionate about helping readers save money. Lequita graduated from the University of South Florida, where she earned her Bachelor’s degree in English.
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Almost all states require car insurance, so you’ll need an active policy before driving your new car. The dealership will likely ask you for proof of insurance at the time of the transaction. If you already have auto insurance on an existing vehicle, it’ll cover your new car when you drive it off the lot. Most insurance companies give you at least a week to add a new car to your policy.
But if you don’t have car insurance, you’ll need to get it before driving your new car. You might also want to consider extra coverage to protect your investment. Here’s what you need to know about getting auto insurance after buying a new vehicle.
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Insurance Requirements When You Buy a New Car
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When you buy a new car, make sure you meet your state’s minimum car insurance requirements. Most states require you to have at least bodily injury liability and property damage liability coverage. But some states require additional coverages such as personal injury protection (PIP) and uninsured motorist (UM).
The specific requirements also depend on whether you lease, finance, or pay cash for your car. Below, we’ll take a closer look at the insurance requirements for each method.
Financed vehicles
When you finance a new car, lenders usually require additional coverage beyond your state’s liability requirements. Your lender has a financial stake in your new car (since it technically owns the vehicle), so it wants to protect its investment.
Most lenders require you to show proof of full-coverage insurance, which includes comprehensive and collision coverage, when applying for a loan. A lender might even require uninsured/underinsured motorist coverage and gap insurance.
If you don’t have auto insurance, your lender might require something called “vendor’s single interest insurance.” Essentially, the lender will pass on the cost of insurance to you by adding it to your car loan. Your lender can also get something called “forced-placed insurance,” which only covers the car when you don’t have insurance or allow your policy to lapse.
Leased vehicles
Your leasing company may also require more insurance to protect its financial interests. So, in addition to meeting your state’s insurance requirements, you’ll have to buy collision and comprehensive insurance, just like if you’re financing your vehicle.
Some companies also require gap insurance (more on that later). If your insurer does, it may include it in your lease payments. Companies often set minimum-coverage limits, so check the requirements before you purchase a policy.
Cash purchases
If you pay for your car in cash, you won’t need to meet any additional insurance requirements beyond getting state-minimum coverage. You may want to consider additional insurance and new-car replacement coverage (if your insurer offers it) to protect your investment, but we’ll cover these in more detail later.
When to Buy Insurance for Your New Car
If you’re buying a new car or don’t have prior insurance coverage, you’ll need to get a policy before you drive in most states. Many dealerships require proof of insurance to complete your transaction, and lenders may require it with your loan application.
But you’ll get a little wiggle room if you already have a car insurance policy covering another vehicle. Most auto insurers give you a grace period of seven to 30 days to add a new car to your policy. Typically, your policy will extend to your new vehicle and offer the same coverage levels — at least initially.
Not every car insurance company extends coverage to new vehicles, so check your policy. Keep in mind that if you only have liability insurance for your old car, your new one won’t have coverage if you crash it before you officially add it to your policy. If you want to update your coverage, call your car insurance agent before heading to the dealership.
How to Get Your New Car Insured
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Whether you finance your new vehicle or buy it with cash, be sure to get an affordable car insurance policy that meets your requirements before signing a lease or purchase agreement. Here’s how it works, step by step.
1. Consider insurance costs when car shopping
Some cars are more expensive to insure than others due to differences in claims costs from one make and model to the next. You can often get discounts for certain safety features, but, if the car is expensive to repair or is more likely to cause expensive damage, you might pay higher premiums.
It’s a good idea to compare car insurance quotes for the vehicles you’re considering. If a car is particularly costly to insure — even if it drives like a dream — you may want to consider another option.
2. Understand your insurer’s grace period for new cars
You can skip this step if you don’t have coverage on an old or current vehicle. If you have a policy, call your insurance agent or check your insurance documents for information about extending your current coverage to a new car.
Grace periods vary between insurance companies and across states, but your policy will outline the rules.
3. Consider potential policy changes and coverage needs
Decide if you need to make any adjustments to your policy and if your current insurer meets your needs. If your new car costs more to replace, consider higher comprehensive and collision coverage limits, for example. Or, you may need to add full coverage if you only had liability insurance on your old vehicle and you’re financing or leasing the new one.
4. Ensure you’re covered before driving off the lot
Make sure you have adequate coverage before driving your new car off the lot. The dealership may ask you for your insurance card, so be sure you purchase a policy ahead of time if you don’t already have existing coverage.
While nobody thinks they’ll get in an accident on the way home, it happens. Even if you’re within your insurer’s grace period, you may not have adequate coverage even if you meet your state’s minimum insurance requirements. That’s why it’s important to consider extra protection like higher coverage limits or gap coverage before you drive off the lot.
5. Get proof of insurance
After choosing a policy and paying your first premium, you can typically access your insurance card online or in the company’s mobile app. If you need a hard copy, you can print your card from your online account. Your insurer may also send you a copy of your policy and your insurance cards in the mail.
6. Compare quotes and apply for your new policy
Whether you have a current policy or not, you should shop around for auto insurance. Even if your current insurer offered cheap coverage for your old car, you might find better deals elsewhere for your new wheels.
Car insurance rates vary from one insurance company to the next, and prices can change over time. To find the best deal, gather quotes from multiple insurance companies.
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Coverages to Consider When Purchasing a New Car
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You may likely need to purchase additional coverages for your new car, even if your state only requires liability insurance. Whether you need to fulfill lender requirements or you’re just worried about being underwater financially, consider the options below.
Full coverage
In addition to fulfilling your state’s liability coverage requirements, you may need to purchase full-coverage insurance, which usually includes:
Collision coverage: Pays to repair the damage resulting from an accident you cause with another vehicle or a stationary object.
Comprehensive coverage: Helps reimburse you for repairs if a fire, flood, earthquake, or hailstorm damages your vehicle or if you hit an animal or a falling object. It also covers theft and vandalism.
It’s especially important to get full coverage if you rely on your car and don’t have the savings to repair or replace it after a crash.
Gap insurance
If you total your car, a standard auto policy will only reimburse you for your car’s actual cash value (ACV). That might be less than you owe on your auto loan, especially if you made a small down payment, rolled over an old car loan, or took out a long-term loan.
Gap insurance covers the difference between your outstanding loan balance and your vehicle’s value. Without gap coverage, you could owe your lender thousands after a serious accident.
New-car replacement
You may also want to consider new-car replacement coverage, since new vehicles lose value quickly — about 20% in the first year, according to Kelley Blue Book (KBB). Some insurers offer new-car replacement coverage as an add-on to a full-coverage policy for a new vehicle. It offers even more coverage than gap insurance and is also suitable for cash buyers.
If you total your vehicle in a crash, you can get a payout equal to the cost of a brand-new car of the same make and model instead of your car’s depreciated value.
New Car Insurance FAQs
If you still have questions about getting auto insurance for your new car, here are answers to some of the most common questions.
What’s the grace period for new car insurance?
Most insurance companies offer a grace period between one week and one month. During this time, your current coverage will extend to your new vehicle. If you don ’t notify your insurer that you bought a new car during this time, your insurer will no longer cover your new car.
Do you need to buy insurance before purchasing a new car?
It depends. If you don’t have coverage for another vehicle, you’ll need to buy a new policy before purchasing a new car. If you already have car insurance, you can typically let your insurer know after the fact, but you should check your policy for your insurance company’s specific rules.
Does your current auto insurance translate to a new car?
In most cases, yes. Your current auto insurance will generally cover a new vehicle up to your existing coverage limits. But you’ll need to inform your insurer that you bought a new car within its grace period. If you miss the deadline and get into an accident, your insurer could deny your claim.
Do you need to tell your insurance company before you buy a new car?
Not necessarily. Most insurance companies give you between seven and 30 days to update your existing policy with your new vehicle information. But not all insurers offer a grace period, so you should check your policy before purchasing a new car.
Sources
Insurance Information Institute, “Automobile Financial Responsibility Laws by State,” Accessed April 11, 2024.
Insurance Information Institute, “What Is Covered by a Basic Auto Insurance Policy?” Accessed April 11, 2024.
Consumer Financial Protection Bureau, “What Kind of Auto Insurance Options Are Available When Financing a Car?” Accessed April 11, 2024.
Illinois Insurance Association, “How Does New Car Replacement Insurance Work?” Accessed April 11, 2024.
Insurance Information Institute, “What Determines the Price of an Auto Insurance Policy?” Accessed April 11, 2024.
Insurance Information Institute, “How Can I Save Money on Auto Insurance?” Accessed April 11, 2024.
Insurance Information Institute, “What Is Gap Insurance?” Accessed April 12, 2024.
Kelley Blue Book, “How To Beat Car Depreciation,” Accessed April 12, 2024.
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Lindsay FrankelInsurance Writer
Lindsay Frankel is a personal finance and insurance writer who’s been writing for Compare.com since 2023. Her work has been featured in publications such as Investopedia, LendingTree, The Balance, SFGate, Bankrate, and FinanceBuzz.
Lequita WestbrooksSenior Editor
Lequita Westbrooks is an insurance editor at Compare.com. Her writing and editing experiences span several industries, including insurance, personal finance, higher education, and more. She excels at explaining complex topics like auto insurance in simple, easy-to-understand language and is passionate about helping readers save money. Lequita graduated from the University of South Florida, where she earned her Bachelor’s degree in English.
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