How To Get Insurance for a New Car

Some car dealerships allow you to drive a new car off the lot if you can show proof that you already have auto insurance on another car. In this case, you’ll just need to be sure to add the new car to your auto policy within your carrier’s grace period. However, there are some car dealers that will require that you have a policy that specifically lists the newly purchased car before you can leave.

Fortunately, buying new car insurance is relatively simple and in this article, we’ve outlined the steps for you.

Key Takeaways In most states, you are required to carry liability insurance before you are allowed to drive. If you’re financing or leasing your car, then your lender or lessor will also require you to maintain comprehensive and collision coverage. Gap insurance may be recommended if you made a small down payment on your car purchase. If you already have car insurance, you will typically have a grace period to add the new car to your auto policy.

When Do I Need To Buy Car Insurance for a New Car?

You will always need to buy car insurance for a brand new car — it’s just a matter of when. Say you have coverage on another car: You can drive the new car off the lot in many cases without buying a new policy on the spot.^[1]

This is due to a grace period that many insurers offer to their customers, which can range up to 30 days.^[2] Taking advantage of this grace period does not mean that you can go without buying a new policy or adding the car to a multi-car policy. After all, they will need to adjust your premium because they are insuring another vehicle. If you neglect to add the vehicle to your policy, you will be uninsured after the grace period and create a lapse in coverage, which is sure to raise your premiums come renewal.

Don’t make assumptions about your grace period, however. It’s always best to speak with your insurer before buying a car to make sure you’re both on the same page.

Is Car Insurance Required for New Cars?

Not only do you need new vehicle insurance if you want to legally drive it but new cars are often financed or leased and therefore require more insurance, specifically collision and comprehensive coverage, on top of minimum state required car insurance coverages. Lenders require both collision and comprehensive coverage to secure their investment in case of a severe accident or theft of the car.

What Types of Insurance Should I Consider for My New Car?

We’ve compiled the most common types of car insurance coverage required by law, as well as optional coverages worth considering.

Liability Car Insurance

If you were at fault in an accident, liability coverage covers the cost of repairs to another car, injury to their passenger(s), pedestrians on the road and property damage. If the other driver is at fault, their liability coverage should pay for your losses.

Nearly every state requires drivers to maintain at least liability insurance. However, in New Hampshire, if you prove you have the money to pay for a major accident, you are not required to buy car insurance.^[3] Also, in Virginia, you can pay a $500 waiver fee instead of buying a car insurance policy.^[4]

Uninsured Motorist Coverage

If you’re in an accident and the at-fault driver has no insurance or you were the victim in a hit-and-run, this coverage will pay toward your losses. In some states, uninsured motorist coverage is mandatory but it’s a useful coverage to have even when it’s not required by law.

Personal Injury Protection (PIP) or Medical Payments Coverage

Personal injury protection (PIP) is required in some states and will cover your medical bills, regardless of who was the at-fault driver. In addition, it can cover lost wages and funeral fees. Keep in mind that a PIP deductible may apply.

Medical payments coverage functions similarly to PIP except that it won't cover lost wages, there is generally no deductible for filing a medical payments claim and is optional in most states that offer it.

Comprehensive Coverage

If you have a loan on the car or you’re leasing it, you’ll be required to buy comprehensive coverage, which will protect you against multiple non-collision car accidents, such as having your car stolen or vandalized. You choose the deductible on this coverage, which is what you’re responsible to pay towards repairs or losses.

Collision Coverage

If you hit another car or object, collision insurance is the coverage that will pay for you to fix your car. Like comprehensive coverage, collision coverage is required if you have an auto loan and it has a deductible, which is deducted from a claim payout.

Gap Insurance

If your car is totaled but you’re still paying it off, gap insurance will pay toward the remaining balance on your auto loan. Collision and comprehensive insurance only pays the depreciated value of your totaled car and that payout can be smaller than you think, especially when considering that cars can depreciate already 20% in just the first year of ownership.^[5]

Gap insurance is usually purchased if you’ve made a small down payment.

Additional Car Insurance Coverages To Consider

Below are optional car insurance add-ons that you may want to buy.

• New car replacement coverage: New car replacement coverage means that you will be paid out at your car’s replacement cost instead of its actual cash value, which is the depreciated value of the car. However, replacement car value coverage is generally available for only newer cars. For example, new car replacement coverage is only available for Liberty Mutual customers if their car is less than one year old or has less than 15,000 miles racked up.^[6]
• Rental car reimbursement: If you’re in an accident that causes you to need repair work, you will need a rental car while your car is at the mechanic shop. Rental car reimbursement coverage would pay for this cost, up to the policy’s limits.
• Roadside assistance: Even new cars can experience a mechanical breakdown and you’ll want roadside assistance to get your car back up and running. Adding this to your policy can give you access to tows, battery jumpstarts, locksmith services and more.
• Umbrella insurance: If you’re responsible for a costly accident — a multi-vehicle pileup for instance — then the costs can easily exceed your policy’s liability coverage if you only bought the minimum amount. An umbrella insurance policy can pay toward those excess expenses. That said, an insurer may require you to carry at least $250,000 in auto liability coverage before you can buy umbrella insurance.^[7]

How Much Is New Car Insurance?

It costs $1,982 per year on average for full coverage, which is an auto policy that meets your state's minimum requirements plus collision and comprehensive coverage. If you opt for minimum coverage, the annual cost lowers to $549.^[8]

Do New Cars Cost More To Insure?

There are generally two reasons for why insuring a new car is more expensive: They are often more expensive and they are financed or leased, which means that a lender will require full-coverage car insurance, which includes both comprehensive and collision insurance. In the event of an accident or theft/vandalism of the car, these coverages will help pay for damages or a total loss.

What Factors Affect the Cost of New Car Insurance?

There are several variables that go into calculating the premium your insurance company charges, including:

Age	Zip code
Years of driving experience	Deductible
Driving record	Marital status
Credit score (in states that allow it)	Homeownership
Car value	Insurance profiles of household members of driving age
If you’ve had a lapse in coverage	Annual mileage
Vehicle year, make model	Gender (in states that allow it)
Applicable discounts	Claims history
Coverage limits	Insurer

How To Get New Car Insurance

If you already have car insurance, follow the steps below to add your new car to your auto policy.

1. Ask your carrier about its grace period policy: You may have up to 30 days to add a new car to your auto policy but some carriers might not offer a shorter period or not offer a grace period at all. Be sure to confirm this before buying your car.
2. Decide how much coverage you want: You may want to buy higher liability limits to avoid having to pay out of pocket for more serious car accidents. Don’t forget to consider optional add-ons like new car replacement coverage or roadside assistance.
3. If no grace period is offered, add the car to your auto policy: You will need to gather details about the new car and schedule for coverage to start on the date you plan to buy it.
4. Show proof of insurance to the car dealer: In general, car dealers will allow you to drive the new car off the lot if you show proof that you already have auto insurance on another car.^[1]
5. Buy the car: Congratulations on your new purchase!
6. Add the new car to your auto policy: You will need to supply your carrier with the new car’s VIN and your lender’s information within the grace period. Keep in mind that insuring another car will increase your premium.

Are There Ways To Save on New Car Insurance?

Maintaining a clean driving record, qualifying for car insurance discounts and shopping around are some of the best ways to get the cheapest price possible on insurance for your new car. Collecting and comparing quotes from at least three to five insurance companies is a general good rule of thumb. However, providing information about your insurance history, background and vehicle for each company can be tedious.

A more convenient alternative is to shop around using SmartFinancial. Simply provide information about your driving history and desired coverage, and we'll connect you with seasoned insurance agents who can assist in matching you with the perfect auto policy. Click here to get started on your free car insurance quote.