Do you need proof of insurance to buy a car?

You can't buy a car without insurance, but you are allowed to test drive it and negotiate a deal. If you try to buy a car without insurance, you may be denied until you can provide proof of insurance.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Sep 15, 2020

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Here's what you need to know...

  • When you own a vehicle, you’re required by law to carry third-party liability insurance to comply with mandatory insurance laws
  • If you’re buying a vehicle from a dealer, you don’t need proof of coverage to test drive the car
  • How long the coverage extends to a newly acquired vehicle depends on the state and the type of coverage you’re carrying

If you’re on a mission to find the perfect car, it’s important to prepare for your car shopping experience well in advance. You should price interest rates, compare lenders, access vehicle history reports and review safety crash test ratings to ensure that you choose the best loan and the safest car.

You’ll also need to price the cost of insurance on all of the models you’re looking at so that you can keep your insurance expense as low as possible.

Even though pricing insurance is important, you won’t actually need to buy coverage until you officially own a car.

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Why don’t you need your own insurance to test drive a car?


Experts recommend that you have coverage whenever you get behind the wheel of a car, but there could be exceptions to the rule if you’re test driving inventory off of a dealer lot.

Dealers spend a pretty penny on lot insurance and liability insurance.

The coverage extends to owned vehicles to pay for damages to vehicles sustained while a car is being test driven by customers or maintained by employees.

When you decide that you really like a car, you’ll be asked to provide a copy of your driver license before the agent hands over the keys.

When accompanied by a representative of the dealer, the dealer is typically held liable.

The only time that you really need to worry about having your own coverage is when your negligent acts are intentional and the injured party comes after the dealer and you as the driver.

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What if you’re test driving a private party vehicle?

If you’re thinking about buying a car from a private party, you might be held liable for an accident.

Since most injured parties will file suit against the driver first and the owner second, you should have coverage before you can comfortably test drive a car for sale by owner.

If you don’t, let the owner know and have them verify that you would be covered as a permissive user during the test drive.

When are you legally required to buy auto insurance on a vehicle?


It’s better to be safe than sorry, but you’re not actually legally required to buy auto insurance on a specific car until you own it in the eyes of the state.

If you’re going into negotiations, you’re not yet the owner.

It’s not until you agree to a dollar amount, sign the bill of sale, and sign the promissory notice that you’ll be held accountable for purchasing a minimum amount of insurance.

You can’t even register your vehicle in your name unless you have insurance on it.

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How much insurance are you required to buy?

Insurance requirements vary by state, so you should check to see what the liability requirements are in your state before you buy a car.

Some states may also require that you carry personal injury protection, medical payments of uninsured motorist protection.

If you’re buying the car outright, you only need to prove you have state minimum coverage.

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Are you required to buy protection for the car?


State law doesn’t say that you’re required to carry physical damage coverage to pay for repairs to your car.

While it’s not a state requirement, you may be required under contract to buy comprehensive and collision coverage if you’re financing or leasing the car.

If the dealership has connected you with a lender to finalize the sale, it’s the finance agent’s responsibility to get proof that the borrower has full coverage that extends to the new car before they drive away.

Will your existing auto insurance satisfy proof of insurance requirements?

It can be frustrating to approach the end of a deal just to be asked for your proof of insurance. What you might not know is that your existing coverage may satisfy requirements if you have the appropriate type of coverage.

Under the personal auto policy provisions, the policy will provide you with coverage for replacement vehicles and for newly acquired vehicles.

You won’t get automatic coverage for the entire term, but the extension will last long enough to give you time to shop around.

The average coverage extension will last for 14 days but some companies are more generous and give you 30 days.

You’re expected to add the car within this time to avoid lapses. If you only have liability, the new car will have full coverage for no more than 4 days.

What are the consequences of being uninsured?


The penalties for driving without insurance can be steep.

Here are some of the consequences:

  • Uninsured loss
  • Citation for being uninsured
  • Court fees and fines
  • Civil litigation
  • Enforcement of lender-placed insurance
  • Requirement to file an SR-22
  • High-risk insurance rates
  • Suspension of your driver license or registration

If you don’t have car insurance or you want to find a better rate for the new car that you’re going to purchase, start shopping now.

You can use an online insurance comparison shopping platform and search for car insurance quotes from large insurers instantly.

Use  our FREE tool below to compare car insurance rates now! Enter your zip code below to get started!

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