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What is the new car insurance grace period?

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Every vehicle in the United States should be insured before they can be legally driven. Whether you are buying a brand new car or replacing your old one, whether you are shopping at a dealership or from a private seller, you must have proof of insurance before you can take the vehicle home. Some insurance companies offer a grace period for you to add the new vehicle to your policy, failing which you may be penalized for driving uninsured. Ranging from seven to thirty days, this grace period only applies to vehicles you have bought within the past month, simply to give you some time to insure your new car without a lapse in your policy.

Key Takeaways

  • The new car grace period ranges from a week up to thirty days, depending upon the insurer.
  • Not all insurance companies offer a grace period and vehicles must be insured immediately upon purchase.
  • The DMV may not recognize grace periods and reject application of vehicle registration.
  • Failing to insure a vehicle within the grace period results in coverage lapsing.

Do you need insurance to buy a car?

It is not possible to drive off a new car from the dealership without proof of insurance. If you are buying your first car and do not have an existing auto insurance policy, the safe choice is to not take the vehicle home until you purchase insurance. Driving a vehicle without insurance is risky. You can be penalized if caught and your license suspended.

You do not need to have already purchased the car to be able to buy insurance. As long as you know the make and the model of the car as well as the vehicle identification number (VIN), you should be able to sign up for an insurance policy. If you know these details in advance, you can start the process of buying insurance before actually getting the keys to your car. Otherwise, once you have completed the purchase at the dealership or with a private seller, you can immediately sign up for a policy online, get digital proof of insurance and drive off with your vehicle.

What is an insurance grace period?

In certain cases, your insurance company may give you a grace period between seven and thirty days, to have your new vehicle included in your auto insurance policy. This only applies to those who already have an insurance policy or an insured vehicle. If you are replacing your old car, you need to remove it from your policy as soon as possible before you add your newly purchased vehicle. As long as you have proof of an existing auto insurance policy, you will be able to take your car home and insure it within the grace period. This holds true regardless of whether you are purchasing the vehicle from a dealership or from a private seller. Failing to complete the necessary paperwork will result in a lapse in coverage and bring along serious ramifications, including higher cost of premiums and liability for damages caused in case of a crash or collision.

Not all insurance companies offer a grace period. Before you complete the purchase of a vehicle, it is recommended that you consult your insurance provider to find out if you need to have the car included in your policy before you bring it home. Also, if your car is being financed, you most certainly have to provide proof of insurance to the lender, and in many cases, you may also be required to carry more than the minimum liability coverage.

Do different states have different requirements?

In most states, the minimum car insurance coverage is legally required to not only drive the vehicle, but also get it registered with the DMV. Minimum coverage includes bodily injury liability coverage per person and per accident and property damage coverage. If you live in a no-fault state, you may also be required to carry personal injury protection and uninsured/underinsured motorist protection coverage. If your state requires proof of coverage for vehicle registration, you will need to complete insurance for the car before you can take it home. Even if you get a grace period from your insurance provider, the DMV may reject the application for registration without sufficient proof of coverage.

Why to avoid a lapse in coverage

Car insurance coverage lapses happen for many reasons. But the fact remains that it is a major red flag to any insurance provider. Whether you forgot to pay your bill, missed the renewal date or sold your only vehicle, they can all result in a lapse in coverage. When you have a grace period to get your newly purchased vehicle insured but fail to do it within the stipulated time, your coverage is going to lapse and cause serious consequences.

The biggest drawback of letting your coverage lapse is the steep rise in your insurance premiums when you try to get coverage again. In addition to your driving record and claims history, a lapse in coverage could make it difficult for you to buy insurance from a regular provider, because you are considered a high-risk customer. However, if you have previously had no lapses or claims and your driving record is otherwise clean, your insurance provider may reinstate your policy for a fee. To avoid all of this hassle, it is best to have your new car included in your insurance policy either immediately or well within the grace period.

Frequently asked questions

Can I purchase insurance before having possession of the car?

Yes, as long as you know the make and the model of the car and have the VIN, you can buy insurance coverage. The dealership or private seller should share the VIN with you once you have finalized the deal.

Do I need insurance for registering a vehicle?

Yes, the minimum mandated coverage is required for the registration of a vehicle. Even when your insurance company grants a grace period, it may not be recognized by the DMV.

How do I avoid a lapse in coverage?

A lapse in your auto insurance can have serious consequences. To avoid that, you must make sure to pay your bills on time, insure vehicles as soon as you purchase them, and keep your provider updated if you stop driving or sell your only car.

Written by
Cynthia Widmayer
Insurance Contributor
Cynthia Widmayer is an insurance contributor for Bankrate and has over two years of experience as a personal finance writer. She covers home, car and life insurance products for Bankrate, The Simple Dollar and among others.
Edited by
Insurance Editor