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Although buying a new car is an exciting milestone, it can be exhausting. Between finding the perfect ride, haggling with dealerships and securing financing, finding new car insurance might be the last thing on your mind. However, most dealerships won’t let you leave the lot if you don’t provide proof of insurance, and even if they did, failing to financially protect your new investment could prove to be a costly mistake. Bankrate’s insurance editorial team has real-world agency experience, and we’re here to break down what you need to know when buying car insurance for a new car.
How to get car insurance for a new car
You can buy insurance for a new car in a few different ways and during various times of the car-buying process. As long as you obtain a policy before leaving the lot, the process you choose is largely personal preference. To buy insurance for a new car, you can:
- Buy a new policy before purchasing your new car: If you know the exact vehicle you will be purchasing, you might find it easier to obtain coverage before heading to the dealer. To do this, you’ll need the VIN, which you should be able to find on the dealership website or by giving the dealer a call. Once you have purchased your new policy, you may want to print off a declarations page or download the company’s mobile app so that you can quickly provide proof of coverage to the dealer.
- Save a quote and purchase the policy while at the dealership: This choice may be a good one for those who know the year, make and model of the car they plan on purchasing but don’t know the VIN. When you’ve chosen the vehicle you’ll be taking home, simply call your agent or go online to finish the quote. It’s important to note that your quoted premium may change once you input the VIN, as this information provides the insurance company with the exact trim level and safety features for the vehicle.
- Allow the dealer to provide a policy: Some dealers have in-house agencies or relationships with certain insurance companies. If this is the case, the dealer may offer to provide you with a policy. Although this option may be convenient, it may not be the most economical since you won’t have the opportunity to shop around for quotes or choose the coverage options that are best for you.
Why it costs more to insure a new car
When you buy a new vehicle, your aim is to protect it from all kinds of damage, especially if it has been financed. In this case, getting only state minimum coverage is not enough. You also need to add collision and comprehensive coverage if you want to protect your new car from physical damages (and satisfy your financing requirements). This hikes up the cost of insurance. On the contrary, an older car that has been through many years of hard work may not require the protection it once did and can get by only with the minimum coverage.
Although newer models of vehicles may cost more to insure compared to older ones, your premiums might not be exorbitant if your new vehicle has advanced safety features and a statistically low claim rate.
Additionally, car insurance premiums also vary based on your demographics, location, driving record and the type of car you drive. Comparing quotes from multiple providers is the easiest way to tell how much it might cost you to insure your new vehicle.
Necessary and recommended coverage
As stated above, your legally-required insurance coverages vary depending on the state in which you reside. When you purchase a new vehicle, you more than likely be required to carry the coverages below, whether by your lienholder, leasing company or your state.
- Comprehensive: Comprehensive coverage is usually optional if you own your car but may be required if your new vehicle is being financed. This coverage pays for repairs needed due to damage incurred outside of collisions. For example, if your car is stolen, vandalized or damaged by bad weather, that’s where comprehensive coverage comes into play.
- Collision: Collision insurance helps pay for repairs to your vehicle if you’re at fault in an accident or hit a stationary object, such as a mailbox or light pole.. If your vehicle is paid in full, you may not be required to have this coverage. However, if your new vehicle is financed, your lender may require it.
- Bodily injury: Bodily injury liability coverage pays for the other party’s medical expenses if you are at fault in the accident. Usually, this coverage is broken down on a per-person, per-accident basis. For instance, you might see 25/50 under bodily injury coverage on your policy documents. This means you have $25,000 per person and $50,000 per accident in bodily injury coverage. This coverage is mandatory in almost every state.
- Property damage: Property damage liability coverage helps to pay for damage that you cause to someone else’s property in an at-fault accident. For example, if you hit another vehicle and have $25,000 in property damage liability, your policy will pay up to $25,000 to fix the other person’s car. Like bodily injury coverage, property damage is usually mandated by the state.
Sometimes, car insurance add-ons are appropriate and advisable. If you have recently purchased a new vehicle or you’d like to bridge the gap between your car’s actual value and the amount you still owe, you may want to look into the following coverages:
- New car replacement insurance: When you drive your new vehicle out of the dealership, it depreciates in value. New car replacement coverage will ensure that your insurance company will pay the replacement cash value of the vehicle, rather than the actual cash value (or how much the vehicle is worth, minus depreciation). Although some of the best car insurance companies offer this optional coverage, not all do.
- Gap insurance: Gap insurance seeks to bridge the gap between the amount you owe on your new vehicle with the total amount of cash value it carries. This scenario is ideal for those who currently owe more than the vehicle’s worth.
How to transfer insurance to a new car
If you already have an auto insurance policy in place, it should be easy to transfer coverage from one vehicle to another, or to add the car to your existing policy. Simply contact your insurance provider by telephone or log in to your account online to make changes.
However, if you do choose to maintain your current insurance policy, you may still find it beneficial to compare car insurance quotes. Buying a new car could be the perfect time to re-evaluate your insurance needs, and you might be able to find a cheaper company that could help offset the higher car payment that you may now have after your new purchase.
Frequently asked questions
Usually, the dealership will not allow you to take your new vehicle home without providing proof of insurance. If you already have an existing policy, some companies may extend coverage to your new vehicle for the first 30 days of ownership. Still, most insurance professionals recommend avoiding this route, as only your current coverage will apply to your new vehicle. For instance, if your old car only has liability coverage, then that’s all the coverage that your new car will have, too. Although it may not be the most exciting aspect of buying a new car, obtaining coverage is essential in ensuring you have the proper financial protection.
No, most states require you to have a certain level of liability coverage to drive legally. If you are financing or leasing your vehicle, you will more than likely have additional coverage requirements you must meet, such as comprehensive and collision and in the case of leasing, higher liability limits.
Often, because the new car has a higher actual cash value, the cost to insure it can be higher as well. However, if the new car is equipped with safety features and upgrades, it may help you qualify for lower premiums.
You can save on new car insurance by shopping around for the best cheap insurance options, considering which types of coverages are most necessary and qualifying for insurance discounts.