Buying a car isn’t just about picking a make and model. You also need to think about the financial and legal implications of your purchase. Auto loan financing, state registration, and insurance requirements can all affect when you can legally drive your vehicle.
Do you need insurance to buy a car? Do you have to have it right away, or is there a grace period? This article will cover the role insurance plays in the car-buying process, including when it’s necessary, the types of car insurance you'll need, and how to get covered.
Is Car Insurance Required To Buy a Vehicle?
So do you need to have insurance to buy a car? In general, yes. It’s illegal to drive a car without insurance in all US states except New Hampshire and Virginia. Many dealerships and lenders require proof of insurance before finalizing a sale.
Driving Off the Lot: Why Proof of Insurance Matters
Some dealerships and private sellers allow you to complete a sale without proof of insurance, but driving off the lot is another story. Technically, insurance is only required to drive a car, not to purchase it.
While your dealership may finalize the sale, they won’t let you drive the car until they’ve confirmed you've met minimum car insurance requirements. If you purchase a car from a private seller, you may not have to provide proof of insurance, but it’s still illegal to drive it uninsured.
How you finance your car may also impact insurance policy requirements. If you pay in cash, then you only need to have minimum liability coverage to register your vehicle. However, most lenders and leasing companies require that you obtain full coverage, including collision and comprehensive car insurance.
How To Get Car Insurance Before or After Buying a Car
Here’s how to buy car insurance for a new car to get covered before buying:
- Figure out the make, model, and vehicle identification number (VIN) of the car.
- Compare quotes from multiple insurance companies.
- Contact insurers and give them the details of your chosen vehicle.
- Get a formal quote. Your insurance company can usually give you a temporary quote so coverage is activated immediately once the sale is complete.
- Once you finalize the purchase, update your insurer with the exact details and any other information they need.
If you’re getting insurance after buying, you’ll need to select a policy and provide your new car’s details to your insurer as soon as possible. Always make sure the policy is active and you've obtained proof of insurance before you drive away.
Understanding Grace Periods for New Car Purchases
A grace period is a temporary window of time in which a new vehicle is covered under your existing policy. So when you buy a car, how long do you have to get insurance if there's a grace period?
Grace periods typically last between seven and 30 days. Be sure to call your insurer within the time frame and officially add the new vehicle to stay protected. Not all companies offer a grace period, and it only applies if you have an existing policy.
Insurance Requirements for Private Sales and Trade-Ins
Car sales don’t always involve a dealership. Do you need car insurance to buy a car from a private seller?
Legal insurance requirements are the same regardless of who you’re buying from. If you’re getting a car as a gift or buying one privately, you still need to arrange coverage in advance or immediately update your policy after you buy.
If you’re trading your car in, you need to maintain coverage until the title and registration are officially transferred. Once the trade-in is complete, you can contact your insurer to update your coverage.
Choosing the Right Coverage for Your New Vehicle
You’ll almost always need liability car insurance, but there are additional coverage options that may be beneficial to you.
Optional coverages include:
- Collision insurance: Covers vehicle damage in the event of an accident, regardless of who's at fault
- Comprehensive insurance: Covers non-collision damage such as weather damage, theft, and vandalism
- Gap insurance: Covers the difference between your outstanding loan balance and the actual cash value of your car
- Uninsured/underinsured motorist insurance: Covers accident damage if the other driver is uninsured
- Personal injury protection (PIP) insurance: Covers costs associated with injuries caused by an accident, including medical bills and lost wages
You should always consider whether the need for protection outweighs the cost of your policy. For example, if you take out a loan on a new, expensive car, then additional coverage may be a good idea. But if you pay for a used car in cash, the additional protection may not be worth the premiums.
Avoiding Common Insurance Pitfalls When Buying a Car
Car insurance requirements often differ by state and seller, but some rules apply in just about every case. Avoid making these common mistakes:
- Not getting insured before driving off the lot
- Underestimating your coverage needs (lien holders often require comprehensive car insurance, while collision coverage may be legally required)
- Not comparing quotes before committing to a policy
- Not getting gap insurance
- Failing to update your existing policy with your new car’s information
- Overlooking deductibles and discounts
Compare Car Insurance Quotes Before You Buy
Whether you’re upgrading your existing policy or buying insurance for the first time, it’s important to consider all your options to ensure you get the protection you need at a fair price.
EverQuote allows you to compare auto insurance rates from top providers side by side. Simply fill out some basic information to see comprehensive comparisons and options for bundling insurance to save money.