4 Tips to Know When to Buy Insurance after Buying a Car

Do you have to have insurance to buy a car? Your existing coverage will satisfy insurance requirements on the new car for between 14 and 30 days.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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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® Joel Ohman

UPDATED: May 4, 2022

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Here's what you need to know...

  • If you’re about to purchase a vehicle, you need to get quotes for auto insurance first
  • You don’t legally have to buy car insurance until you are the legal owner and registered owner of the car
  • If you don’t already own a car, you need to buy insurance on the vehicle that you buy after you sign a bill of sale and before you drive it
  • When you already own a car and have a car insurance policy that’s written in your name, you don’t have to buy a new policy right away
  • Your existing coverage will satisfy insurance requirements on the new car for between 14 and 30 days

Buying a car takes a lot of preparation. Since it’s one of the larger items that you’ll purchase in your lifetime, it’s very important that you research all of your options before you decide on a model or a dealership.

You may not be able to test drive a car and negotiate the sales price before you go on your shopping excursion, but you can take the steps that are necessary to buy insurance on your soon-to-be vehicle. When you live a busy life, it’s easy to put off important business.

Do you have to have insurance to buy a car? Unfortunately, if you don’t have the right auto insurance policy in place when you buy your new car, you could be left waiting in the lobby. It’s important to time your insurance right.

Compare car insurance quotes today by entering your ZIP code into our free tool above.

Read on to discover four tips to help you know exactly what to do.

#1 – Shop for Auto Insurance before You Get a New Car

In fact, when you’re looking for the best car for you and your family, it’s best that you shop for car insurance before you start shopping for a car.

When you have a general idea of how much insurance will cost on a car, you can decide if you can afford it.

Every vehicle has its own unique rates. Even the same models can have different rates if one vehicle is newer than the other. The rates for each vehicle are dependent, in part, on the car’s grade through the Insurance Institute for Highway Safety.

They are also dependent on the following:

  • Car size
  • How much a car costs to repair
  • How expensive parts are
  • The number of claims that are filed by drivers in the same type of car

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#2 – The Dealer’s Insurance Coverage Will Cover Test Drives

You don’t legally have to have insurance until you own a car. Since the inventory that your test driving is owned by the dealer, the dealer can’t require you to have insurance.

You’re free to test drive as many cars as you want at any legitimate dealership without having your own existing policy.

While the company has its own policy to protect them from a lawsuit after an accident, there’s still a chance that someone injured in an accident can sue you for being reckless.

So even though you’re not required by any type of vehicle code to have insurance on a car you’re test driving, it’s in your best interest to have some protection.

#3 – You Must Have Insurance to Buy a Car

Do you buy insurance before or after the car? When insurance is mandatory, you must have an actual insurance policy on a car as soon as you become the vehicle owner.

Since you’ll become the owner of any car that you buy while you’re still at the dealership, you need to have insurance in place at some point while you’re buying your car before you even go home.

Every state has different mandatory insurance laws. A couple of states don’t require insurance, but most do. What the state has mandated as compulsory and what the dealership requires are two different things.

If you’re financing a car, the dealer must verify that you have full coverage insurance on the car.

Full coverage is required on cars that are being financed because it’s a condition of your auto loan.

It doesn’t matter if you’re financing your car directly through your credit union or you’re getting a loan through the dealership, you still need to demonstrate evidence that you have comprehensive and collision to protect the collateral.

#4 – Your Existing Coverage Will Extend for a Period of Time (Grace Period)

How do you buy insurance on a car you just bought? You might feel rushed after learning that you have to have insurance immediately after buying a car, but you’ll be happy to hear that it’s all a lot easier when you already have a policy in place.

If you already own a car that’s insured in your name, your existing policy will give you some extra time to insure the car.

If you have a standard personal auto policy, the terms of the policy say that your coverage will extend automatically to a car that you buy during the policy period. Even though coverage does extend without a phone call, it won’t protect you forever.

Here are some things that you need to know about newly acquired vehicle coverage:

  • Coverage will extend to an additional car for several days
  • Coverage will extend to a vehicle replacing another on the policy for the rest of the term
  • If you haven’t called your insurance agent to add the new car by the end of the coverage period, your coverage will lapse
  • You will get the broadest coverage option that you carry on the car
  • If you don’t have full coverage, you’ll receive four days of comprehensive and collision coverage on the new car

If you don’t currently have insurance, now’s the time to buy a policy. Start getting quotes on the cars that you like the most and budget for insurance premiums by entering your ZIP code below.

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Enter your ZIP code below to view companies that have cheap car insurance rates.

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