Don’t Forget about Purchasing Car Insurance for a New Car

Purchasing car insurance for a new car is crucial as it is illegal to drive without insurance. Be sure to consider new car replacement insurance or GAP insurance if you are financing. Remember, buying new car insurance grace periods only last for 30 days or less depending on your provider. Enter your ZIP code below to keep new car insurance costs as low as possible.

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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: Jan 26, 2021

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Here's what you need to know...

  • Failing to purchase car insurance for a new car or verify automatic coverage is a big mistake
  • Almost all states require you to carry auto insurance
  • Lenders require borrowers to carry full coverage auto insurance to protect their interests in the car until they sign the title over

If you want to be granted permission to drive your new car off of the lot when you purchase it, you need to be sure that the vehicle is insured. Auto insurance is mandatory is most states and a very understandable requirement at that.

No dealer or responsible private seller is going to hand over the keys and allow an uninsured driver to hit the road for a joyride in their newly acquired vehicle no matter how much they pay upfront.

Start comparing car insurance rates now by using our free insurance tool above!

Why is it important to purchase car insurance for a new car?

Buying a car can be an all-day event. You may step on the dealership lot early in the morning and find yourself walking out to your new car after the sun has already gone down.

Not only will you be required to show proof of coverage, but you should also want to have coverage to protect your new investment and your assets.

Forgetting about the small details is extremely easy when you are completing such a large transaction. It is not out of the ordinary to handle the financing, to research safety features and to compare gas mileage before making a purchase.

Driving without insurance is actually a very common offense, with as many as 12.6 percent of the licensed population driving uninsured each year.

If you would like to learn when you should buy insurance or how to go about getting coverage quickly, read this guide so that you do not make costly mistakes when you are excited to take your new car home.

If you do not yet have insurance and the finance officer forgets to ask for proof, you may be tempted to jump in the car and drive off without verifying the car is covered.

After all of the hassle and the negotiating, the last thing you want to do is haggle pricing for the car you have signed contracts for.

No matter how tempting it is, failing to buy coverage or verify automatic coverage could be the biggest mistake you could ever make.

You could face civil lawsuits, criminal sentences, and hefty fines by choosing not to pick up the phone and bind coverage.

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

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Free Car Insurance Comparison

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

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When Financing a Car, You Agree to Carry Continuous Cover

If you pay cash for a vehicle, the finance company may not be too concerned about your coverage status, but if you are signing a loan contract, you must prove you have cover to meet the lender requirement.

Lenders require borrowers to carry full coverage auto insurance to protect their interests in the car until they sign the title over.

If you drive off the lot and something happens to that car, the lender will come after you to seek the money that you owe.

If they are notified that your policy cancels, they may even force-place insurance months later and add the cost to the loan. Failing to buy insurance will cost you in the long run.

You Can Never Predict When You Will Have a Loss

You never expect to have an accident right after buying a vehicle, but there is no doubt that it could happen.

If you are in an accident and you are uninsured, you have absolutely no liability insurance to pay for third-party injury damages or property damages.

Being deemed at fault for a loss that results in injury or damage can lead to major problems in court when the victim or their insurer takes you to court.

It is possible that your wages could be garnished or your assets liquidated so that you can help the victim recover. This one decision could lead to civil judgments that could affect you for a large period of your life.

You Can Face Criminal Penalties

If you are cited for driving your new car without insurance, or you have an accident and are seen in court, you may also face criminal penalties.

In many states, being cited just once for being uninsured is a

misdemeanor. You may be able to have the misdemeanor taken off of your record if you prove you have bought insurance in court.

Some of the criminal penalties you could face include:

  • Moving violation citation with a fine
  • Vehicle impound with a fee for storage and towing
  • Driver license suspension
  • Registration suspension
  • Requirement to file an SR-22
  • Sentence to spend up to 1 year in jail for first offense

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When do buyers have automatic coverage on a new car?

An auto insurance policy has a very thorough definition of what vehicles are covered under the policy and what vehicles are not.

Apparently, listed vehicles are covered under the policy with the options and limits listed. Borrowed vehicles, owned travel trailers, replacement vehicles and newly acquired autos are also added into the definition of most personal auto insurance policies.

A new car may be covered under the newly acquired or replacement auto definition.

If the car is a replacement and there is existing insurance, the car will receive the coverage of the car being traded in.

If the car is a new additional car, it will receive the same coverage limits as the vehicle with the broadest coverage for up to 14 days (some states allow 30).

After the vehicle buyer is not the named insured on a policy, the buyer must buy a separate plan to have coverage.

If you do not have existing insurance that will extend to your new auto, you need to be sure to check out the insurance rates for the auto you are buying. You can do this in advance so that you know how much you can expect to pay.

If you want to price the cost of insurance quickly before visiting the dealer, start comparing rates now by using our free comparison tool below!

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