New Car Insurance: What Coverage Do You Need When Buying a New Car?
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Car insurance is required by law in most states, which is why you generally won’t be allowed to leave the dealership with your new ride until you provide proof of insurance. Your coverage should meet your state’s minimum car insurance requirements.
Luckily, you can gather car insurance quotes online very easily, and once you’ve settled on a policy, you and your new car can be on your way. If you’re wondering how much coverage you need and how to switch insurance to a new car, car insurance comparison shopping and broker app Jerry has compiled everything you need to know.
- Minimum requirements
- Getting auto insurance
- Special considerations
- Insurance grace period
- Where to shop for new car insurance
Minimum requirements for insurance on a new car before you leave the lot
The minimum requirements for new car insurance vary depending on whether you are financing, leasing, or paying for the car in full.
Financed car: On top of your state’s mandated minimum liability car insurance, you’ll likely be required to get comprehensive and collision coverage.
Leased car: You’ll usually be required to have comprehensive and collision coverage and your deductible may be capped at $1,000. Your state’s minimum liability coverage may also be insufficient, as leasing companies typically want coverage of $100,000 per person, $300,000 per accident for bodily injury, and $50,000 for property damage.
Owned car: If you’ve paid for a car in full, then you’re only required to have the state-mandated level of liability coverage.
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How to get auto insurance for a new car
Once you’ve decided which car model you want, you’re ready to start shopping for new car insurance. First, you should decide how much coverage you need. You can stick with the minimum insurance requirements listed above, or you can pay a bit more money for greater protection and peace of mind.
Next, you should gather at least three new car insurance quotes to compare prices. It’s easiest to do this online. Car insurance companies all use their own unique formulas to determine premiums, weighing factors like location, age, and driving record, so you may get significantly different rates for the same driver and vehicle.
You should have your car’s vehicle identification number (VIN) on hand when you’re gathering quotes. Also, if members of your family will be driving the car regularly, be sure to list them on the policy.
If you already have a car insurance policy, you may find that you can get a better rate with another company and decide to switch car insurance. Or you may choose to stick with your current insurer, in which case you can add your new car to your existing policy.
Once you’ve settled on a policy and an insurer, make sure that your new car insurance goes into effect on the very day you purchase the vehicle. Insurance companies can generally send proof of insurance to a dealership as soon as a policy is sold.
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Special considerations for new car insurance
Aside from the minimum requirements for new car insurance, you may also want to consider getting optional coverages. A new car is a significant financial investment, and the following three coverage types can protect you financially in the event that your vehicle is damaged or totaled.
New car replacement insurance: The benefit of new car replacement insurance is right in its name—if your car is totaled, you may be able to replace it with a new one of the same make and model. Alternatively, this coverage may provide you with a similar model or a specific dollar amount.
Repair provision coverage: If your new car suffers only a partial loss, then this coverage can take care of the cost of repairs to get your vehicle back out on the road. Your insurance company may pay out for repairs on a replacement cost basis, which means your car’s depreciation won’t be factored in.
Gap insurance: Short for “guaranteed asset protection,” gap insurance can cover the difference between what you owe on a leased or financed car and the depreciated amount your insurer will pay out if the car is totaled. It ensures that you can pay off your remaining balance on a loan or lease. Otherwise, you would be stuck paying money for a car you can’t even use.
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Insurance grace period when buying a new car
If you already have an insured car, you may not need to get insurance for your new ride right away. Your insurance company may offer you a grace period where any new vehicle you buy will be covered under your existing policy for a short amount of time. This means that if you get into an accident in your new car, it will be protected under the same coverage and limits as your old car.
The length of the grace period varies by insurer. There are generally two types of grace periods for new car insurance:
Two to four days: This brief grace period may apply to you if you’re adding a new car to an existing policy. It enables you to take your new car home and then quickly contact your insurer to buy coverage and update your policy.
Seven to 30 days: You may be able to take advantage of this longer grace period if you’re replacing an insured car with a new ride that you’ve bought outright.
When you buy a car from a dealership, you can expect the dealer to confirm your insurance status under your grace period before you drive off. Make sure you buy new car insurance before the grace period expires, as even a brief lapse in insurance coverage can cause your premiums to rise.
Frequently asked questions
How long do you have to get insurance on a new car?
If you don’t have an existing car insurance policy, you’ll need to get insurance before you buy a new car. Otherwise, you won’t be allowed to leave the lot with the vehicle. If you do have an existing auto policy, your insurance company may give you a grace period of two to 30 days before you have to inform them that you bought a new car.
Will my old insurance cover my new car automatically?
If you already have a car, your insurance company may automatically extend coverage for your previous vehicle to your new one. Both cars will have the same amount of coverage. So, for example, if you previously owned a Honda Civic with liability-only car insurance and you bought a Toyota Corolla to replace it, the Corolla will also have liability-only insurance for the duration of the grace period. Be sure to confirm the terms and conditions of any grace period with your insurance company.
Can you drive a car without insurance if you just bought it?
The answer is no. Most dealerships won’t let you leave the lot with your new car if you can’t provide proof of auto insurance. Dealers do have their own insurance, but it covers test drives; it won’t provide you with any protection once you buy a vehicle.
Why is insurance higher for new cars?
New car insurance is often higher in price because most lenders require drivers to buy comprehensive and collision coverage, which pays for physical damage to the vehicle. New cars are also more expensive to repair and they’re costlier to replace. And according to data from the Insurance Institute for Highway Safety, many newer cars are less able to withstand low-impact collisions. This makes them more of a risk to insure, and your premiums may rise accordingly if you buy one of these cars.
How much will a new car affect my insurance?
There’s no one-size-fits-all answer to this question, as new car insurance rates are determined by many factors, such as your personal profile, your car’s make and model, your car’s safety rating, and your car’s likelihood of being stolen. But generally speaking, you can expect to pay more for new car insurance, especially if you lease or finance your vehicle and are required to buy comprehensive and collision coverage.
Where to shop for new car insurance
When you’re buying a vehicle at a dealership, the dealer may offer you their own selection of new car insurance policies. While buying coverage directly from a dealer may seem convenient, this won’t allow you to shop around and compare quotes to get the lowest rate. If you want the best deal possible on new car insurance, it’s strongly recommended that you do your own shopping.
The easiest way to shop for new car insurance is to head online. And yes, you could visit the website of each prospective insurer and fill out a long form, compare the quotes you receive, and then deal with the paperwork and phone calls to set up your new policy, but honestly, who has the time for all that? If you want a convenient way to quickly compare and buy new car insurance, try Jerry.
It takes less than a minute to sign up for Jerry. Once you do, the app will compare offerings from the country’s top insurance companies, weighing their prices and coverage to what you’re getting from your current policy. This ensures that you get the right coverage for the most affordable price.
If you want to switch plans, you just need to click a button. Jerry will take care of the rest by handling the paperwork and phone calls to establish your new policy and cancel your old one.
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