How To Buy Car Insurance For Your New Car: While purchasing a new car is thrilling, the process can be quite tiring. From selecting the ideal vehicle to negotiating with dealerships and arranging financing, obtaining new car insurance might not be your top priority.
Nevertheless, most dealerships require proof of insurance before allowing you to drive off the lot, and even if they didn’t, leaving your new investment unprotected could lead to significant expenses. Bankrate’s insurance editorial team has hands-on experience with agencies, and we’re here to guide you through the essentials of buying car insurance for your new vehicle.
While you might technically be able to purchase a car without insurance, most dealerships mandate that you have coverage before driving away.
Every state requires car insurance, with the exception of Virginia, where you can pay a $500 fee to forgo coverage, and certain remote areas of Alaska. In all other states, proof of insurance is necessary before you can get behind the wheel. To comply with the law, your car insurance policy must meet your state’s minimum coverage requirements.
Here’s a rundown of what you need to know before obtaining insurance for your new car.
When should I secure insurance for my new car?
If you don’t have car insurance, you’ll need to purchase a policy before driving your new car off the lot.
If you already have an insurance policy, you can show your insurance card at the dealership to prove coverage. This allows you to complete the purchase, but you’ll still need to notify your insurance provider about the new vehicle. Most insurers give you a grace period of seven to 30 days to report the addition of a new car.
Even if you have existing coverage, it’s smart to inform your insurance company about your plans to buy a new car before you make the purchase. New cars typically have higher values than older models, which means your insurance premium will likely increase. Factoring this into your budget ahead of time can help you avoid any surprises.
Additionally, discussing your new car purchase with your insurance company beforehand can protect you from dealership upsells on extra insurance products like gap insurance. By having a solid insurance plan in place, you can confidently decline unnecessary add-ons and avoid extra costs.
What to Consider When Purchasing Car Insurance
Whether you’re new to car insurance or have experience, these tips can help you make an informed decision.
Here are some strategies to find affordable car insurance:
- Bundle Your Policies: Purchasing multiple types of policies from the same insurance company, such as home and auto insurance, can yield significant discounts, often referred to as “multi-policy discounts.”
- Seek Discounts: Many insurers offer various discounts, such as for insuring multiple vehicles, having safety features in your car, installing anti-theft devices, maintaining a good driving record, or being a good student.
- Raise Your Deductible: Increasing your deductible for comprehensive and collision insurance can lower your premiums. Higher deductibles mean you pay more out of pocket in the event of a claim, but you can save between 7% and 28% on premiums, according to Forbes Advisor’s analysis.
- Limit Optional Coverage on Older Cars: For older vehicles, it might not be cost-effective to maintain certain optional coverages. Consider when it’s appropriate to drop collision and comprehensive insurance for such cars.
Read Also: Best Car Insurance Companies
How Much Insurance Do I Need for a New Car?
The amount of auto insurance you need depends on various factors, including the age of your car, whether you have a loan or lease, and your state’s minimum legal requirements. It’s also wise to ensure you have enough coverage to protect yourself financially in the event of a serious accident. Here’s what you need to know:
State Minimum Car Insurance Requirements
Your new car insurance policy must meet the minimum requirements set by your state. These requirements usually include:
- Liability Insurance: This covers injuries or damage to others’ property if you cause an accident up to your policy’s limits. Except for Virginia and remote parts of Alaska, every state mandates a minimum amount of liability insurance.
- Uninsured and Underinsured Motorist Coverage: Required in nearly half of the states, this coverage pays for your medical expenses or property damage if an uninsured or underinsured driver causes an accident.
- Personal Injury Protection (PIP): Also known as no-fault insurance, PIP covers medical expenses for you and your passengers after a crash, regardless of fault. It may also cover lost wages due to injuries from the accident.
- Full Coverage Insurance: If you have a car loan or lease, you’re typically required to have full coverage insurance. This isn’t a specific policy but rather a combination of coverages, including:
- Comprehensive Insurance: Covers damage to your car from non-collision events like fire, hail, vandalism, and theft up to the market value of your car minus your deductible.
- Collision Insurance: Pays for damage to your car from collisions with objects or other vehicles up to the market value of your car minus your deductible.
- Gap Insurance: Gap insurance covers the difference between the remaining balance on your car loan or lease and the car’s current market value if it’s totaled or stolen. Without gap insurance, you’d be responsible for paying that difference out of pocket.
How to Buy Auto Insurance Before Buying a Car
If you don’t already have car insurance, you’ll need to obtain a policy before you can drive your new car. While it might seem unusual to buy insurance for a car you don’t yet own, the process is quite simple:
Identify Your Desired Make and Model: Spend some time comparing cars and deciding on the vehicle you want to purchase.
- Gather Vehicle Information: To buy an insurance policy, you’ll need details such as the vehicle make and model, Vehicle Identification Number (VIN), mileage, and your driving record. If you don’t know the VIN or mileage, you can provide your insurer with the make, model, and year of the car you intend to buy (e.g., a 2018 Toyota Camry).
- Compare Insurance Quotes: Don’t settle for the first insurer you find. Shopping around can help you find the best rates. You can use comparison tools, like NerdWallet’s car insurance comparison tool, to compare rates from various insurers.
- Submit an Application: Once you’ve selected an insurance company, apply for your new car insurance policy. Depending on the insurer, you may be able to complete the application online. If you don’t yet have the car details (like the VIN), you can get a preliminary quote but won’t be able to finalize the purchase until you provide this information.
- Purchase Your Vehicle: After securing proof of insurance or finding a carrier willing to cover you, you’re ready to head to the dealership and buy your new car.
How Much Does Car Insurance Cost for a New Car?
On average, car insurance costs $2,067 per year, which breaks down to about $172 per month for a driver with a clean record and full coverage.
Several factors can influence your final insurance premium, including:
- Age
- Driving history
- Gender (in certain states)
- Credit score (in certain states)
- Choice of insurance provider
- Geographic location (even specific ZIP codes)
The type of car you choose also plays a significant role in determining your monthly auto insurance premiums.
