If you buy a car from a dealership or from a private seller, you need to be sure that you have insurance in place as soon as the transaction is complete.
While research, test drives, and negotiations take time, the entire process could be delayed if you forget to walk into the finance office with your insurance in order. The last thing you want to do is spend more time trying to buy a new or used car.
Auto insurance is something that most states have made mandatory. Since there are compulsory insurance laws 48 out of 50 states, it’s important that you know how much insurance you must buy, when you must buy it, and where you’re expected to buy your auto insurance coverage from.
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Table of Contents
Is auto insurance mandatory in most states?
If you’ve ever owned a car, you know that auto insurance is usually mandatory. What many consumers don’t know is that the type of coverage that’s required is set by state officials and not federal officials.
While there is a national agency that’s called the National Association of Insurance Commissioners, it’s the state legislature that decides how much insurance is required.
Since auto insurance bills are passed at a state level, the type of coverage and the limits that you must carry will vary depending on which state you call home.
In most states, you must have at least some third-party liability coverage to pay for property repair bills and doctor visits when you damage property or hurt a person in an accident.
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What kind of insurance should you get?
You must comply with the state minimum requirements discussed above. However, these insurance requirements are usually for liability-only coverage and you may decide you need a greater level of protection.
With collision coverage and comprehensive coverage, repairs to your vehicle will be paid for by your insurance (after any deductibles) if it is damaged. These coverages may be required if you have an auto loan. Collision, comprehensive, and liability insurance combined is called a full-coverage policy.
You may also wish to purchase other types of insurance, such as uninsured/underinsured motorist coverage, personal injury protection, or GAP insurance. With GAP insurance, your auto insurance provider will cover the difference in the cost of what you owe on your loan and what your vehicle is worth after it is totaled.
When are you responsible for insuring a car?
You don’t have to insure just any vehicle that you drive. When you’re test driving a car or borrowing a vehicle, it’s not your legal duty to buy insurance for it.
It’s not until you take ownership of the car and you have an insurable interest in it that you need to purchase a policy on the vehicle. Registered vehicle owners must comply with their state’s insurance laws.
While you might not get your vehicle registration right away, as soon as you sign a bill of sale, the original owner of the car can submit a release of liability request that includes your information as the purchaser. At this time, the state holds you responsible for complying with insurance laws.
You should never drive without insurance. Doing so can result in severe legal consequences including fines and registration and/or license suspension.
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Can you drive your new car without auto insurance?
You can test drive a vehicle on the lot without having your own personal car insurance, but you can’t drive the car home without securing a policy. It’s the dealer’s responsibility as a responsible place of business to check and see if someone who buys a car has insurance.
If the buyer were to drive off without coverage, it would put hundreds of drivers and pedestrians at risk of hurting someone without any type of protection.
This is one of the main reasons why the agent that you’re working with will ask to see a proof of insurance before they give you the key.
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Can you drive a car you buy from a private seller home without insurance?
Private sellers don’t have a license to sell cars. This is why they aren’t legally obligated to take a copy of your insurance before you drive away with your new car.
Just because the seller doesn’t have to ask for proof doesn’t mean you don’t need to have insurance in place.
Just like when you buy a car from a dealer, you need to have insurance on a car that you buy from a private party before you drive it off the lot. As long as you’ve signed a bill of sale and the car is in your name, it’s your legal duty to buy insurance on it to avoid some hefty fines.
You should not test drive a car for sale by private owner if they cannot produce proof of insurance. Since you’re the one driving it, if they aren’t covered, you could face lawsuits in the event of an accident.
How long do you have to get insurance after buying a used car?
Buying a used car from a dealership means you will have to provide proof of auto insurance. On the other hand, a private seller will not need proof. If you plan to add your used car to your auto insurance policy, you may not be required to do it right away. How long do you have to insure a used car after purchase will depend on the state you reside in. If you neglect to do it within the specified time, you risk cancelation of registration.
How soon after buying a car do you need insurance?
In just about every state, driving a car without insurance is illegal. The effects of driving uninsured can be devastating if you get into an accident. So, if you are buying a car for the first time, you must first purchase car insurance if you have not done so already.
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Do you need to buy a new policy on the car if you have existing insurance?
You don’t always need to rush to buy auto insurance when you’re going car shopping.
If you already have a personal car insurance policy on a vehicle that’s registered in your name, your current policy can protect you for a fixed period of time. It gives you a little time to contact your insurance agent and shop around to see if you can find a better price with another auto insurance company.
How long does your existing insurance protect you?
Every state has different rules when it comes to providing coverage for a newly acquired vehicle. Newly acquired vehicles are considered covered autos, but in some scenarios, you don’t have very long to add the new car before there’s an insurance coverage lapse.
Here are the time frames:
- If you’re buying an additional car, it will be covered for 14 to 30 days
- If you’re buying a replacement car, it will be covered for the remainder of the term
- If you need full coverage and you don’t have it, you’ll get 4 days of comprehensive and collision insurance coverage
It’s wise to start shopping for insurance before you go on a mission to find the right car. Use an intelligent online comparison shopping tool and you can get instant rate auto insurance quotes from all of the leading car insurance carriers.
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