How to Buy a New Car Without Insurance

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When you buy a car, you'll need to show the dealer proof of financial responsibility before you can take your new ride home. If you already have a policy on another car, you might not need to take out a new policy.

Most insurance policies will cover your new vehicle up to the limits of your current policy for up to 14 days. But if you're leasing or financing a new vehicle, your lender may have additional requirements.

When to purchase car insurance if you're buying your first car

If you're buying your first car, it's best to get an insurance policy before completing the purchase.

While some dealers will let you purchase a vehicle without proof of insurance, none can allow you to drive it off the lot without showing the car is insured. (You may, however, take a car for a test drive while it's still owned and insured by the dealer, provided you have a driver's license.)

All 50 states and the District of Columbia require drivers to have financial responsibility of some kind.

Insurance premiums also differ according to the vehicle. More expensive cars often cost more to insure. If you're choosing between a few different cars, get insurance quotes for each model so you understand the insurance costs before purchasing the vehicle.

What kind of insurance policy should I get for a new car?

Young drivers may also need to decide whether to purchase their own insurance policy or join a parent's policy. Some parents may be tempted to put their teen on a separate policy in order to protect their premium rate. But because insuring a young person on a solo policy is expensive, it's typically more cost-effective to add the teen to an existing policy.

If you're leasing or financing a vehicle, the lender may ask you to purchase coverage with limits that are higher than your state's minimum. Additionally, some leasing contracts include a "forced place" clause that allows the leasing company to select and charge for an insurance policy on behalf of the lessor if they don't provide proof of insurance within a specified time frame. Ask about these matters before signing any paperwork.

Once you've chosen a car and reached a verbal agreement with the dealer, contact your insurance agent so they can write a policy and set the effective date as the day you plan to take possession of your new car. You'll need to provide the car's make, model, VIN and any other information the agent may request. Just be sure you actually close the deal so you don't take out an insurance policy on a car you don't end up owning.

If you plan to purchase your new vehicle over the weekend, it's even more important to finalize your insurance policy ahead of time, when your insurance agent is readily available.

Do you need a new policy if you're adding or replacing a car?

Your existing policy on another vehicle should cover your new car for four to 14 days, so you don't need to change your policy before you purchase a car. This applies whether you're adding or replacing a vehicle.

You can make these updates and add coverage to your existing policy by contacting your insurance agent. Larger insurance providers, like Geico, allow you to do this easily online.

While you can rely on your older policy for a while, doing so presents a certain risk. Most car insurance policies only cover your new car against damage or loss up to the actual cash value of your current vehicle. As a result, your new car is likely underinsured under your old policy. That's why it’s best to add your new vehicle to your policy and increase the coverage limits before taking possession of the car.

What is new car insurance?

The value of a new vehicle typically drops by 10% as soon as it's driven off the dealer's lot, and it can decrease another 20% over the course of the first year.

Let's say you purchase a brand-new car using a $15,000 auto loan. After the first year, you owe $12,000 on the loan — but the car's value has dropped to $9,750. If you get into a serious accident and the car is totaled, your insurance company would only cover the car's actual cash value of $9,750, minus any deductible. You would owe your lender the remaining $2,250 out of pocket.

However, there are special types of coverage made for owners of new cars.

New car replacement coverage

New car replacement coverage pays to replace your new vehicle with another one of the same make and model, and with the same features and upgrades. This addition to your policy will increase your premium, but it protects you against the decline in your car's value.

Because a car's value drops the most within the first few years, new car replacement coverage could be a good option for the first few years you own the vehicle. But if you're comfortable taking on the risk, you can skip this coverage and the higher premium that goes with it.

Repair provision coverage

This type of coverage reimburses you for car repair costs above and beyond the vehicle's actual cash value.

Gap coverage

Guaranteed asset protection, or gap coverage, is especially valuable for those who have leased or financed their vehicles. If you total your vehicle before paying it off, your insurance company would pay the actual cash value of the car and you'd be on the hook for the remaining balance. But gap coverage takes care of the difference between the actual cash value and the amount you still owe.

Frequently Asked Questions

Do I need insurance before I buy a car?

Yes. While some dealers might let you buy a car without insurance, it is always best to have insurance before you buy a car. A dealership is not allowed to let you drive off the lot until you show proof of insurance.

Can you drive without insurance if you just bought a car?

No. It is illegal to drive a car without insurance, even if you just bought the car.

Do you need insurance to test drive a car?

No. As long as you have a valid driver's license, most car dealerships will allow you to test drive a car without insurance. This is because during a test drive, the car is still owned and insured by the dealer.

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