Buying a New Car Without Insurance – ValuePenguin

When you buy a car, you’ll need to show the dealer proof of financial responsibility before you can take your new ride home. If you already have a policy on another car, you may not need to take out a new policy.

Most insurance policies will cover your new vehicle up to your current policy limits for up to 14 days. But if you’re leasing or financing a new vehicle, you may need to meet additional requirements from your lender before finalizing the purchase.

Reading: How to buy a car without insurance

when to buy insurance if you are buying your first car

While some dealers will allow you to purchase a vehicle without proof of insurance, none may allow you to drive it off the lot without showing that the car is insured. (However, you can take a car for a test drive while it’s still owned and insured by the dealer, as long as you have a driver’s license.)

all 50 states and the district of columbia require drivers to have some form of financial responsibility.

Insurance premiums also differ by vehicle. more expensive cars generally cost more to insure. If you’re choosing between several different cars, get insurance quotes for each model so you understand insurance costs before you buy the vehicle.

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Young drivers may also need to decide whether to purchase their own insurance policy or join their parent’s existing policy. Some parents may be tempted to put their teen on a separate policy to protect the premium rate. But because insuring a teen with an individual policy is expensive, it’s usually more cost-effective to add the teen to an existing policy.

If you are leasing or financing a vehicle, the lender may require you to purchase coverage with limits higher than the minimum for your state. In addition, some leases include a “forced place” clause that allows the leasing company to select and collect an insurance policy on behalf of the landlord if proof of insurance is not provided within a specified time. ask about these issues before signing any paperwork.

once you’ve chosen a car and come to a verbal agreement with the dealer, contact your insurance agent so they can write up a policy and set the effective date as the day you plan to take possession of your new car. You will need to provide the make, model, VIN of the car, and any other information the agent may request. just make sure you close the deal so you don’t take out an insurance policy on a car you don’t ultimately own.

do you need a new policy if you are adding or replacing a car?

Your existing policy for another vehicle should cover your new car for four to 14 days, so you don’t need to change your policy before you buy a car. this applies whether you are adding or replacing a vehicle.

You can make these updates and add coverage to your current policy by contacting your insurance agent by phone. In our experience, the larger insurance providers like Geico allow you to do this easily online.

While you can rely on your old policy for a while, doing so comes with some risk. Most auto insurance policies only cover your new car against damage or loss up to the actual cash value of your current vehicle. As a result, your new car may be underinsured under your old policy. That’s why we recommend adding your new vehicle to your policy and increasing the coverage limits before you take possession of the car.

what is new car insurance?

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The value of a new vehicle typically drops 10% as soon as it leaves the dealership, and can drop another 20% over the course of the first year.

however, there are special types of coverage for new car owners.

new car replacement coverage

New car replacement coverage pays to replace your new vehicle with one of the same make and model, and with the same features and upgrades. this addition to your policy will increase your premium, but protects you against a decline in the value of your car.

Because a car’s value drops the most during the first few years, new car replacement coverage might be a good option for the first few years you own the car. but if you’re comfortable taking the risk, you can skip this coverage and the higher premium that comes with it.

repair provision coverage

This type of coverage reimburses you for auto repair costs above the actual cash value of the vehicle.

gap coverage

Guaranteed asset protection, or gap coverage, is especially valuable for those who have leased or financed their vehicles. If you total your vehicle before you pay it off, your insurance company would pay the actual cash value of the car and you would be liable for the remaining balance. but gap coverage takes care of the difference between the actual cash value and the amount you still owe.

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frequently asked questions

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