Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 9, 2020

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Here's what you need to know...

  • Car dealers are required to ask for proof of liability coverage before you can get keys
  • If you’re financing the car, you’ll need to provide proof of full coverage
  • Car buyers who already own a car may have coverage that will extend to a new car
  • Failing to arrange insurance before you go to a dealership can cause delays

The car buying process is one that not many consumers look forward to. From strategically navigating your way through the lot, to avoiding high-pressure car salesmen, to negotiating the best deal possible – it’s a lot to deal with in a single day.

While you can never plan for every situation, one way to ensure the car buying process goes smoothly is to plan ahead before you even go on your first test drive.

You can compare rates with various banks, research safety ratings, look up Kelley Blue Book values and even look at online inventories.

All of these tasks will help get you the best deal, but it’s especially important to compare insurance premiums and get the ball rolling before you sit down for negotiations. Here’s your guide on the steps you’ll need to take to insure a car the moment you sign the sales contract.

Start comparing car insurance rates now by using our FREE tool above!

Table of Contents

When are you required to buy car insurance?

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In virtually every state, vehicle owners are required to carry a minimum amount of liability insurance on vehicles that have a valid registration.

This requirement is in place to protect residents on the roadways who could potentially suffer damages or injuries when the vehicle is being operated at the hands of you or your household members.

If you were to just buy a car and get into an accident as soon as you pulled out the lot, having no insurance would land you into a financial hole that would be hard to dig out of.

Not only would you have to pay for the repairs on your own, you’d also have to pay for repairs to the other party’s car and for their medical bills. For people who earn an average income and rely on their paychecks to cover bills, this isn’t reasonable.

For these reasons, you need to have coverage that can be activated right when you sign on the dotted line for a new car.

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Potential Consequences of Failing to Buy Insurance the Day You Buy Your Car

You might think that waiting a day or two couldn’t hurt, but it can in more way than one. Since the dealership often fills out registration paperwork and registers your car for you, the state wants to see you have coverage from the moment those papers were signed.

You don’t have to be pulled over to get caught with a lapse of coverage. With coverage being electronically verified, the DMV will know immediately when your coverage is activated. Some of the penalties for driving without insurance can include:

  • Suspension of your registration
  • Suspension of your driver license
  • Reinstatement fees and fines
  • SR-22 requirement
  • Citations for driving without insurance or valid registration

Fines and fees are not all you have to worry about. If you’re driving home and you get into an accident, you could be forced to self-insure if you have a loss.

If you cause third-party damages and can’t find a way to pay for them, you could wind up in civil court where your wages could be garnished. For borrowers who have taken out a loan, their loan could be at-risk.

If the finance company finds out you didn’t have basic or full coverage insurance, they could cancel your loan for violating the terms of your contract or force-placed insurance and bump up those monthly payments that you thought were competitive.

The worst thing about a lender-placed plan is that it doesn’t even protect you. As you can see, what a difference a day makes.

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How to Prepare Auto Insurance Before You Buy Your Car

It’s difficult to actually buy a policy when you don’t know exactly what car you’re buying. Since most car buyers don’t have their eye on the exact car that they’ll be purchasing, you can’t really finalize your insurance until you get to the dealership.

If you don’t own a vehicle, you can begin to compare premiums and get quotes on the models that you’re most interested in.

For example, if you know you want either a Honda CRV or a Toyota Rav4, you can request two quotes and you’ll have a decent idea of how much you’ll pay. These quotes might even help you lean towards one vehicle and away from another to keep ownership costs down.

Since you can’t physically buy insurance before you own the car, you should start to prepare your insurance application before your visit to the lot.

If you’re using an online quoting tool, you can do this by providing your household information and personal information. You can then save the application to complete it once you decide on a model and have the VIN.

If you’re quoting with an agent, you’ll need to actually speak with the agent to provide the information, finalize your application and activate coverage.

As long as all of the underwriting questions are answered and the details you know are filled in, making the insurance effective immediately doesn’t have to be a chore.

What happens if you trade in a vehicle or you buy a second car?

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Buying insurance isn’t such a hassle when you already own a car. If this is the case, there are conditions written into your contract that make activating protection automatic when you acquire a new or used car.

How your current insurance works will depend upon the circumstances. If you’re replacing a vehicle, the new car will have the same amount of coverage as the vehicle it’s replacing for up to 14 days automatically. It will have the same exact coverage that’s carried on the policy.

If, however, the car is a new addition to a liability-only plan, it’ll receive full cover for 4 days and then you must add the car to receive full coverage.

At the end of the day, you don’t need insurance before buying a car but you can get started with the application process. Start by comparing premiums online using intelligent tools comparison rate tools.

After you do this, you’ll have the quotes saved and you can activate coverage with the click of a button.

Start comparing car insurance rates now by entering your zip code in our FREE tool below!