How to buy car insurance for your new car

Key points:

• If you’re trading in a vehicle, your car insurance policy might apply to your new car during a grace period, usually between seven and 30 days.
• You can typically add your new car to your existing car insurance policy as soon as you buy it.
• Ask your insurance company about new car discounts.

If you just bought a new car, before you drive it on public roads you’ll need car insurance — for your own protection, to meet state requirements and to satisfy the fine print of your loan or lease if you have one. In fact, dealers will likely require proof of car insurance before they hand over the keys.

So how and when do you get insurance when buying a new car? Much of that depends on if you already have a car with full car insurance coverage.

How to buy car insurance for a new car

When buying a new car, insurance is one of the last steps. You don’t want to get car insurance until you’re confident the sale will go through.

Here are different ways you can make sure your new car is properly insured.

If you already have car insurance

If you’re trading in a car at the dealership and it’s fully covered by a current auto insurance policy, you should be able to show that policy to the dealer to get your new set of wheels. Most car insurance companies give you a grace period to update information when you purchase a new vehicle, usually between seven and 30 days.

Here are some other circumstances to keep in mind:

• If your current policy doesn’t include comprehensive and collision insurance and you’re financing or leasing the new car, the lender or leasing company will likely require you to add those coverages before driving off the lot.
• If you’re keeping your old car, you should contact your car insurance company and ask about a multi-car policy.

Regardless of your scenario, you should contact your insurance company or agent before heading to the car dealership, to cover all your bases.

“It’s always a good idea to keep your insurance agent informed of any changes in as timely a manner as possible,” said Amanda Mezerewski, Vice President of Auto Product at Travelers Insurance. “Agents can counsel you through that process to ensure that you have continuous coverage.”

If you’re shopping on the weekend or just prefer self-service options, you may be able to add a new car to your policy in mere minutes using your insurer’s mobile app, depending on the car insurance company.

If you don’t already have car insurance

If this is your first car — or if you haven’t owned a car in a while — you’ll need to buy car insurance before leaving the dealership. Driving without car insurance is against the law in nearly every state.

Here are a few ways to get car insurance for your new car.

• Compare car insurance quotes online, just make sure you’re using the same coverage details so that you’re getting an apples-to-apples car insurance quote comparison.
• Work with an independent agent to compare quotes and find the best auto insurance companies for your needs.
• Purchase car insurance over the phone or online. You may be able to even do this at the dealership after you buy your new car — it’s typically easier if you’ve already generated a quote with the insurance company.

If you know the vehicle identification number (VIN) of the car you’re planning to purchase and are confident the sale will go through, you can even purchase an insurance policy before heading to the dealership that day. Just make sure the car insurance policy start date lines up with the date you take the car home.

How much is car insurance for a new car?

The average cost of car insurance is $2,067 a year ($172 a month) for a driver with a clean record and a full coverage car insurance policy.

A lot of factors can affect how much you’ll ultimately pay, including your:

• Age.
• Driving record.
• Gender (in some states).
• Credit score (in some states).
• Insurance company.
• Location (down to the ZIP code).

The type of car you purchase can also impact how much you’ll spend on auto insurance premiums each month. If you’re prioritizing cheap car insurance when buying a car, models from Subaru and Hyundai may be your best bet. In our research, Subarus accounted for 40% of the 30 cheapest cars to insure, and Hyundai models made up another 20%.

How much car insurance do I need for a new car?

You need enough liability car insurance to meet your state’s requirements. All states except New Hampshire require some form of car insurance, but even this outlier has some requirements to consider. For instance, you must be able to show financial responsibility, or that you can cover costs if you’re responsible for an at-fault accident.

Check your state’s requirements to make sure you’re carrying enough coverage, though when you work with an agent or compare car insurance quotes online, the agent or platform should be able to tell you the state-mandated minimums.

Requirements vary by state and may include:

• Liability insurance (bodily injury and property damage).
• Uninsured/underinsured motorist insurance.
• Personal injury protection (PIP) or medical payments (MedPay) coverage.

The minimum amount of coverage your state requires may not be enough to financially protect you in the event of an expensive accident. When deciding how much car insurance you need, consider how much you can afford to pay out of pocket for repairs and medical bills, as well as the total value of your assets.

Additional car insurance coverages you may need

If you financed or leased the vehicle, you’ll likely need additional coverages. And even if you own your car outright, you may want to consider these optional coverage add-ons.

• Comprehensive insurance: Covers cost of repairs for non-car accident related damages to your vehicle. This could be weather-related damages, car theft, pest infestations or fire.
• Collision insurance: Covers repairs to your vehicle from collision-related damage, like if you run into a street sign or guard rail, or if you’re the victim of a hit and run.
• Gap insurance: Covers the difference between your car loan balance and what your insurance pays out if your car is totaled or stolen. Your car loses value — called depreciation — as soon as you drive it off the lot. If it’s totaled shortly after you buy it, your comprehensive or collision insurance will only cover your vehicle to its actual cash value (the depreciated amount). But you may still owe more than the actual cash value on your loan. Gap insurance covers that difference.

4 helpful car insurance tips for new car owners

If you’ve just bought a new car, review these tips for getting the cheapest car insurance available.

1. Shop around for car insurance

At every policy renewal, it’s a good idea to compare quotes to see how much money you could save by switching car insurance companies. Your current insurer may match the lower price offered by a competitor — and if not, you can move on to a new company.

The same holds true when you buy a new car. Take this opportunity to see if other companies will cut you a better deal on your new daily driver. Check out the best cheap car insurance companies to get started.

2. Ask about new car discounts

When you add a new car to your car insurance policy, some insurance companies may offer you a discount. And it’s not just brand-new cars; some insurers have discounts for used cars from recent model years (i.e., within three years, typically). These discounts can be worth as little as 1% or as much as 40% in savings.

But the discounts can go beyond the new car itself. Friedlander recommends taking this opportunity to explore all the car insurance discounts your insurer offers, including home and auto insurance bundles. “Bundling can save up to 20% or more on your premium,” he said.

3. Stay on top of car payments

Making on-time car payments is important for a lot of reasons, but did you know it could (eventually) lead to lower car insurance rates? In most states, car insurance companies factor in your credit score when calculating your car insurance premiums.

Continued on-time payments on a car loan should eventually lead to a bump in your credit score. When it’s time to renew your car insurance policy (or switch car insurance companies), an improved score could lead to a price reduction.

4. Adjust your car insurance policy

When you first purchase your car, you might be required to carry collision, comprehensive and maybe even gap insurance. But once you’ve paid off your loan, you can choose to drop these coverages. Just keep in mind that dropping collision and comprehensive insurance means you aren’t financially protected in the event of weather-related damages or collisions with objects or other vehicles. 

You might choose a low-deductible policy when you first buy car insurance, simply because you couldn’t afford the greater out-of-pocket expenses that would come with a high deductible.

As your finances improve over time — or after you’ve paid off your car and eliminated that expense from your budget — add some money to your emergency savings. Then you can adjust your policy to have a higher deductible, which will result in a lower car insurance premium.

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