“Most insurance professionals recommend you obtain full coverage for adequate financial protection from significant losses caused by an at-fault accident,” says Mark Friedlander, director of corporate communications for the Insurance Information Institute. “Purchasing state minimums may leave you and your family financially vulnerable in the event of a loss.”
Before you drive away in your next car, learn everything you need about insurance for a new car.
- If you don’t have a policy, you’ll have to shop for insurance for your new car.
- Car insurance on a new car depends on several factors, such as the model, age, mileage, value, safety features of the vehicle and your driving history.
- Many dealerships and financing companies require the new vehicle to be added to your policy before completing the transaction.
Buying a new car: How much car insurance do I need?
As mentioned earlier, just because your state sets a minimum amount for automobile insurance coverage doesn’t mean it’s enough — liability insurance only pays for damages to the other car.
CarInsurance.com editors recommend a minimum of 100/300/100 insurance, which is $100K in bodily injury liability, $300 bodily injury liability per accident and $100K in property damage liability per accident.
If you financed the vehicle, your lender would require full coverage insurance, including collision and comprehensive coverage at a minimum. Drivers also should consider gap insurance, which pays the difference between the amount you owe and how much the car is worth.
Learn more: How much car insurance do I need?
Can you add a new car to an existing car insurance policy?
If you want to trade your existing car for a new one, some of the legwork of getting insurance on a new car is already done. Changing car insurance should be simple, even if you plan to keep your existing car and add a new one. Best yet — you’ll probably be eligible for a multi-car discount.
Contact your insurance carrier to add another vehicle to your insurance or switch vehicles on the policy.
You’ll need the vehicle identification number and details such as the make, model, year and mileage. If you don’t have the VIN yet, it’s all right. You can always add it once you have the keys to the new vehicle.
Remember, the more details you can give your insurer, the more accurate the quote on the price difference between the old and new car insurance will be.
Be sure to comparison shop by getting quotes from a few insurers — you may decide to switch car insurance carriers for a better deal.
How do you insure multiple vehicles?
What type of new car insurance should I get?
While you must meet your state’s minimum liability insurance requirements, insurance experts advise getting full coverage or close to it on a new vehicle.
The Insurance Information Institute recommends getting at least $100,000 of bodily injury liability per person, $300,000 of bodily injury liability coverage per accident, and $50,000 of property damage liability per accident.
Collision coverage
Collision coverage pays for damage to your car resulting from a collision with an object — such as a mailbox, guardrail, or telephone pole — or because your vehicle has flipped over. Collision coverage reimburses you for repairing your car, minus the deductible.
“A full-coverage policy typically includes liability limits well above state minimums as well as optional comprehensive and collision coverage — which around 80% of American drivers carry,” Friedlander says. “Some full-coverage policies also include optional uninsured/underinsured coverage.”
Comprehensive coverage
Comprehensive coverage protects against damage to your vehicle caused by losses other than collisions, including fire, theft, vandalism, falling trees, floods, and other severe weather events. It also covers cracked windshields and animal strikes.
Uninsured motorist coverage
Uninsured motorist coverage is also known as uninsured motorist bodily injury (UMBI) insurance; this coverage will safeguard you and your passengers from medical bills if you are involved in an accident with an uninsured motorist who is at fault. Additionally, this coverage will reimburse you and your passengers for lost wages.
Uninsured motorist property damage (UMPD)
“Uninsured motorist property damage coverage pays for damages to your vehicle caused by an uninsured driver and also covers damage to other personal property,” Friedlander says.
Gap insurance
Bryon Bromley, a Beaverton, Oregon-based auto insurance industry expert, says gap coverage is helpful if you are financing a new car — especially one with a small down payment.
“Your car may depreciate … faster than you pay off the loan, especially at the beginning of the loan period,” Bromley says. “Collision and comprehensive coverage only pay the current value of your car. Without gap coverage, you may be left paying the rest of a loan on a vehicle you no longer own.”
Rental car reimbursement coverage
Rental coverage on a vehicle is optional, and many people don’t think to add it to their policy.
“But if you were involved in an accident tomorrow, would you need a rental car to get to work, for example? If so, you should consider carrying rental coverage,” Bromley says.
New vs. used cars: Check out what our survey found about what car buyers care about.
How to get insurance for a new car
You’ll need to start from scratch if you don’t have an existing automobile insurance policy. Adding and verifying coverage before driving your new car is best for several reasons.
“Typically, you must have all cars in your household insured with the same company. The new car purchase also has to be a vehicle your insurer will actually insure. In some cases, your insurer may not cover certain specialty vehicles, such as heavy commercial trucks, RVs, motorcycles, and exotic cars,” Bromley says. “Secondly, when purchasing a new car, you may need to add new types of coverage, adjust your deductibles, or raise your coverage amounts. You don’t want to end up not fully covered when the unexpected happens. Third, many dealerships and financing companies require that the new vehicle be added to your policy before the transaction is complete.”
The good news is that this allows you to shop around for the best insurance prices. Want tips for buying insurance for a new car? Follow these five steps to get car insurance for a new car.
1. Gather information about the new vehicle
To get an accurate price quote and buy new car insurance, you’ll need some details about the car:
- The vehicle identification number (VIN)
- Make and model
- Year
- Trim package (leather seats, navigation, etc.)
- Mileage
You may not have all this information, but the more details you can provide, the more accurate your quote will be. If you don’t have access to the VIN, you can always provide it after you buy the car.
“You’ll also need to provide the ages and driver’s license numbers for all family members who will be listed on the policy,” Friedlander says.
2. Compare quotes on new car insurance before you buy the vehicle
Get insurance quotes before you buy to understand how much your insurance will cost. You may decide the car you’re interested in is too expensive to insure. It’s better to know this before you buy the vehicle.
“The Insurance Information Institute recommends that you get a minimum of three quotes from a mix of national and regional insurers when shopping for auto insurance to compare costs and coverage,” Friedlander says.
Compare car insurance quotes from more than 25 companies
3. Set an effective date on your policy of choice
Once you’ve decided on your coverage and are ready to buy a policy, request that the policy goes into effect on the same day you buy the car — but make sure there is an overlap in coverage — even a few minutes should suffice.
If you’d like to wait until after you sign the transaction paperwork, ask the insurer to put the policy on hold until you call them, at which time you can complete the insurance purchase over the phone.
“If you are adding a new car to your existing policy, you can typically do so immediately,” Bromley says.
4. Transfer the new car’s title
Curious about how to transfer the new car’s title? The dealership and your lender typically do the title paperwork when you buy a new car. The lender keeps the title until you pay off your loan in full. Once you own the vehicle outright, the lender will mail you the title.
“Each state will have a specific process for transferring the title, including your lienholder when financing a vehicle,” Bromley says. “Your dealership should be able to guide you through the title and registration process.”
When you purchase a new car from a private seller, he or she will sign the title over to you, and you both will sign the appropriate sections on the back of the title.
Complete the transfer at the Department of Motor Vehicles (DMV). Each state has its own requirements, but typically the documents and information you need are:
- A bill of sale showing the purchase price
- Proof the title has been signed over to you
- The VIN (which should be on the bill of sale and title)
- The current odometer reading
You may have to fill out a form to document the title transfer so the DMV can reissue the title in your name.
5. Register the new car
The last step is registering the new car and letting your insurance company know.
“Registering the vehicle is typically handled by the dealership where you purchased it. In a private sale, you’ll need to process the new vehicle registration with your state’s DMV,” Friedlander says.
When you register the car, in addition to the information you need to do a title transfer, you’ll likely need the following:
- Proof of liability car insurance
- Evidence that you’ve paid sales tax on the car purchase
- Certificates showing the car has passed safety and emissions inspections
Check out our detailed guide on how to get car insurance for first-time buyers
FAQ: Insurance for a new car
What’s the insurance grace period on a new car?
For a short time after buying a new vehicle, that car should be automatically covered by your existing auto insurance carrier, even if you haven’t yet contacted the insurer to add a policy for this car.
“Most auto insurance companies provide automatic coverage for new vehicle purchases equal to the broadest coverage you have on your current vehicle or other cars listed on your auto policy,” Friedlander says. “If you already have an auto insurance policy in effect and purchase a new vehicle, the insurance grace period on a new car will typically run from seven to 30 days, depending upon your insurer.”
Should I get insurance for a new car before I buy it?
The new vehicle you intend to buy should be adequately insured when driving it. Most insurers offer a grace period that will automatically cover a new vehicle if you already have a policy with another car. You’ll want to shop around for quotes if you don’t already have a policy or insurer.
Does dealer insurance cover me?
A car dealer has automobile insurance on its vehicles so that you and others can test drive them. But it won’t cover you once you purchase the vehicle. You’ll need to buy insurance for a new car.
Learn how car insurance rates differ for new and used vehicles
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