Do you need insurance before buying a used car?

Michelle Megna | Updated on: Jul 08, 2020

If you're shopping for a used car, you're smart about your spending. After all, pre-owned vehicles are less expensive than a new one. Plus, your used car won't lose its value the moment you drive it off the lot as a brand new car would. But there's a catch -- a used car may be cheaper, but the car insurance may not be. This doesn't mean you can skip out on insurance for used cars.

Do you need insurance to buy a used car?

All states, except for New Hampshire and Virginia, require you to have car insurance, regardless of whether your car is new or used. Even in New Hampshire and Virginia, you'll be financially liable if you're involved in an accident.

Car repairs are expensive. If you haven't gotten a quote lately on how much it costs to replace or repair a bumper, you may be in for some sticker shock. Having to pay out-of-pocket in case of an accident may cost you far more than the annual used car insurance premium.

Luckily, buying used car insurance is a quick and simple process. Before you buy that pre-owned model you have your eye on, it's best to know what kind of car insurance coverage you need, how much it's going to cost you and when to get it.

Compare insurance rates for used cars

You should shop for car insurance as you shop for your vehicle. You don't want to purchase a vehicle only to learn you can't afford the car insurance premium. Once you've settled on a few contenders, you should compare car insurance rates to see what the cost of car insurance coverage is so you can account for it in your budget.

To find average rates for over 3,500 used car models from 2006 to 2020, use our handy tool. Choose the year of the car, your state, plus the make and model of the vehicle you are thinking of buying to find out how much, on average, you can expect to pay for auto insurance coverage. On the results page, you can add more cars to compare to determine which used vehicle you have on your shortlist costs the least to insure.

Full coverage is recommended for vehicles 2011 or newer, so only full coverage (comprehensive and collision plus liability) rates are shown for these years. If you choose 2010 or older as the year, you will see rates for both full coverage and liability only on the vehicle. Remember, if you carry liability only, your vehicle isn't covered by your car insurance policy in any way if it is damaged.

Once you have made your final choice, or if you're deadlocked between a couple of vehicles, it's time to get personalized car insurance quotes by providing the vehicle identification number, or the make and model, to insurance companies. That way, you'll know the exact amount you will need to budget for your car insurance portion of your monthly vehicle expenses.

How much used car insurance do you need?

As mentioned, your state has minimum liability insurance requirements. You may see the minimum coverage referred to as a set of numbers, such as 15/40/25 liability insurance. It means you must have coverage that includes $15,000 per person in bodily injury coverage, $40,000 per accident in bodily injury coverage, and $25,000 in property damage limits. If you can't find your state's insurance requirements, don't worry. Most car insurance providers will know what you need when you enter your state or ZIP code for a quote.

Here's what liability insurance covers in more detail:

Per-person bodily injury: Covers medical expenses and lost wages of people you injured with your car, as well as your legal fees. It includes pedestrians, the occupants of other vehicles and any individuals in your car you're not related to. The amount specified is the maximum per person.
Per accident bodily injury limit: Liability insurance sets a maximum amount your insurer will pay out in bodily injury claims per accident. In a 15/40/25 policy, the "40" figure limits medical bills and injury claims to a total of $40,000 for all injured parties. You'll be responsible for anything over the limit.
Property damage: Covers the cost of repairs or replacement of property you damaged with your vehicle. It can include other vehicles, fences, or buildings.

Although your state has minimum requirements, it's up to you to decide if the coverage is enough. You may want to buy a higher amount of coverage to protect yourself from out-of-pocket costs. Here's why:

You rear-end a vehicle.
Three passengers are injured.
They each need X-rays and medical care, costing $15,000 each.
The vehicle you rear-ended needs $7,500 in repairs.
You also collided with a wall to avoid the accident, which needs another $5,000 in repairs.
In a 15/40/25 policy, $15,000 per person in medical bills is within the limits of your policy of $15,000 per person. But -- three parties were injured for a total of $45,000. That's $5,000 over the $40,000 your policy will cover. You'll be personally responsible for the extra $5,000 yourself.
As for the property damage to the wall and vehicle of $12,500, it's covered as part of the $25,000 in property damage limits.

Keep in mind that liability insurance will help pay for any injuries and damages you caused to others, their vehicles and property if you're responsible for the accident, but it won't cover you or your car. Depending on your used vehicle's value, you may want to add additional coverage to protect your car. Comprehensive insurance and collision coverage are two ways you can protect yourself -- and your vehicle. Consider them as used car repair insurance for certain scenarios.

Comprehensive vs. collision insurance on a used car

Comprehensive insurance pays for damage to your car due to flooding, fire, vandalism and hail, and pays out the actual cash value of your car if it's stolen. Collision insurance covers damage to your car from accidents when you hit, or are hit, by another vehicle or object.

Comprehensive and collision insurance are often purchased together to expand on your protections. They're not mandatory unless you plan on financing your vehicle with an auto loan. Are they worth the extra expense? If your car is less than 10 years old, or worth more than $3,000, it's wise to get these optional coverages.

How to insure a used car?

Now that you have an idea about what you need, you'll find the process of insuring a used car is similar to insuring a new one. You can get a pretty accurate insurance quote on a car, even if you haven't purchased it yet.

If you already have car insurance, you'll need to contact the company you're covered with and let them know you'd like to insure a different vehicle. The representative will ask you about the vehicle to tell you if there's a price difference.

If you're not already insured, it's important to get a few insurance quotes to make sure you're able to afford the insurance premium -- and find the best price. Here are the steps you can follow:

Collect information about the car you're interested in buying. Some of the information you'll need includes the car's year, make, model, equipment package, and miles.
Get online quotes. Insurance quotes can greatly vary based on the type of customer the insurer works with and the products they offer. Two car insurance companies can give you a different price quote for the same kind of insurance. Use our tool to get quotes in just a few minutes. Besides your vehicle's information, you'll need to enter personal details about where you live, whether the car will be parked on the street or in a garage, and the number of miles you anticipate driving per year.
Choose your coverages. Select any additional coverage besides liability insurance. You may want to add roadside assistance coverage, collision, or comprehensive coverage.
Decide on a deductible. The deductible is the amount you'd pay out-of-pocket if you were in a car accident before the insurance kicks in. A typical car insurance deductible is $500 or $1,000. The higher the deductible, the cheaper your used cars insurance will be. If you bump up your deductible to save on your monthly premium, make sure you can afford to pay the higher deductible if you're in an accident.
Save your quote. A quote is usually valid for a set period of time, which varies by insurer. Once you buy your car, you can access the quote, enter any missing details, such as the Vehicle Identification Number (VIN), and pay for the insurance, straight from your smartphone. You can then safely drive away with your car.

How long do you have to get insurance after buying a used car?

Are you asking yourself, "do I need insurance before I buy a used car?" The timing gets tricky. You don't need insurance before you buy a used car. In fact, it would be hard to buy used car insurance if you don't have the final purchase price and the vehicle's identification number. Even if you can, you may not want to buy insurance until you officially own the vehicle -- insurers won't refund you if you buy insurance and the car deal falls through.

Can I drive a used car home without insurance?

If you're buying a used car from a dealer, you'll need to have insurance before you're allowed to drive away. Private sellers may not have that requirement, but driving an uninsured vehicle could land you in hot water. There are a couple of options.

If it's your first car, doing your homework ahead of time by having a saved policy quote could come in handy. Most online insurers will provide instant coverage once you pay for the policy. All you'd need to do is log back in to access your quote, enter the missing details such as VIN and price paid for the car, pay your premium, show the dealer, and you'd be ready to go.

Is there a grace period for car insurance when buying a used car?

You can't drive a car without insurance. If you get pulled over, you'll be in legal trouble. There may be a used car insurance grace period. If you already own a vehicle, you could contact the insurance provider ahead of time to let them know you'll be purchasing a car shortly. Every state has different rules, but most will allow you to apply an existing vehicle policy towards your newly-purchased car for a grace period between seven to 30 days.

Contact your auto insurer as soon as you're the owner of the vehicle to make changes to your current policy. Don't assume the car or extra coverages will be added automatically -- it's your responsibility to notify your insurer about the car and clarify what coverages you want. You'll have to register the vehicle in the state you live in within 15 to 45 days, depending on your state, but won't be able to without the vehicle being insured.

Tips on how to buy coverage to save money

There are a few things you can do to buy coverage and save money on car insurance for used car models. They include:

Look for discounts: Most car insurers have a variety of discounts based on your work or lifestyle, such as student, hybrid vehicle, low-mileage, safe driver and military service discounts.
Prepay your premium: You could save money if you pay six months or one year in advance.
Sign up for autopay: If you link a bank account number and sign up for electronic statements and automatic payments, most car insurers will throw in a small discount.
Bundle your policies: Loyalty comes with perks. If you already have other coverages such as homeowners or renters insurance with a particular insurer, you may receive a discount on all your policies when you sign up for used car insurance.
Pick a higher deductible: The deductible is the amount of money you'd have to pay out of pocket in case of an accident before your insurance starts paying. You could save money on your monthly premiums if your deductible is higher. But be sure you can afford the amount you raise your deductible to. You could take the savings on your monthly premiums and put it away in a savings account each month towards the amount of the deductible. That way, you've got the money saved up for a higher deductible if you're involved in an accident.

Frequently asked questions on used car insurance

Do I need full coverage insurance on a used car?

Full coverage usually includes liability, collision and comprehensive insurance. Having all three covers others -- and yourself -- in case of an accident. If you plan on financing a used car, you will need full coverage. Otherwise, it's up to you to decide whether you should buy full liability.

If you're not sure, the general rule-of-thumb says you should buy full coverage on used car if the cost of upgrading to full coverage is 10% or less of your used car's value. For example, if adding comprehensive and collision insurance costs you an extra $500 per year and your car's value is $2,000, full coverage isn't worth it. But if your used car value is $5,000 or more, then the additional coverage is a smart decision.

To determine your used car's value, visit KBB.com or NADA.com to find out. And regardless of the rule-of-thumb, if you don't think you could afford to replace your car, full coverage will cover you.

Is gap insurance worth it on a used car?

GAP insurance stands for guaranteed auto protection insurance. It's designed to bridge the gap between the value of your vehicle and what you owe on the car. For example, if you have $5,000 left on your auto loan but the car's value has dropped to only $4,000, you may have a problem if your car is totaled in an accident. You will need to continue paying off the $1,000 the insurance didn't cover. If you had GAP insurance, it would step in to pay the $1,000 shortfall between what your car's value is and what you owe.

Gap insurance on used car models isn't normally necessary. You don't have the drop in value you'd have when you drive a brand new car off the lot.

Are older cars cheaper to insure?

You may think that an older car is cheaper to insure. After all, it's worthless in value. But it's not so simple. First of all, if you're buying liability insurance, the coverage is based around third-party coverages -- the damage you could do to others. Newer cars have more safety features that could prevent or minimize accident damage. In this case, a newer car may be cheaper to insure.

If you're buying full coverage for a vehicle, the policy may be cheaper on a used car, simply based on the value you're covering the vehicle for. In the end, it's difficult to generalize. A car's age has less of an impact on the insurance cost than the make and model would. Safety features, the cost of replacement parts and repairs and popularity with thieves are just a few factors that could affect the policy's price. That's why it's important to do your research and compare car insurance quotes before purchasing a used car.

Do You Need Insurance Before Buying a Used Car?