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: Oct 1, 2020

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Here's what you need to know...

  • If you are buying a vehicle that will be financed or leased, you must first sign a finance contract
  • You can avoid driving uninsured and violating the finance contract right after it is signed
  • Having an existing car insurance policy will make driving home with insurance extremely easy

Buying a new car can be an exciting and also extremely daunting process.

After spending hours walking up and down car lots, test driving the cars that catch your eye, and negotiating a sales price, it is finally time to discuss financing.

In that contract, you agree to protect the financier’s interest in the vehicle by purchasing and maintaining automobile insurance.

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Table of Contents

Does your current auto insurance policy protect a newly purchased vehicle?

Having an existing car insurance policy will make driving home with insurance extremely easy.

This is because your coverage that you carry on vehicles that you currently have registered in your name will extend to newly acquired cars for a limited amount of time.

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What is a newly acquired vehicle?

If you review your car insurance policy for terms and conditions, you will find out whether or not your new car is covered.

Most car insurance policies define a covered auto as the following:

  • Private passenger vehicles listed on the policy
  • A newly acquired vehicle
  • A travel trailer that is owned by the named insured
  • Vehicles that are not owned by the insured but are temporary substitutes

Newly acquired cars are those that have just recently been purchased by one or both of the named insured.

It is not a vehicle that was previously owned by the policyholder and is just being added to the policy again.

Instead, you must be taking ownership of the car for the first time by either signing a bill of sale or a document that shows that you have taken over interest.

How much coverage will a newly acquired vehicle have?

While some insurance companies do not even cover newly purchased cars, a majority of contracts will extend coverage for a specified period of time.

If your policy shows that newly acquired vehicles are covered, there can be some confusion if you own multiple vehicles with different levels of protection.

You will find that the coverage that is assigned to the new car will be the same as the car that has the broadest level of protection.

All of the coverage on your vehicle with the most comprehensive options will extend, but many people wonder what will happen if they have a vehicle that only has liability and does not have physical damage cover.

If this happens, you will need to either cover the vehicle immediately or add full coverage to your old vehicle before you visit the dealer so that it will extend.

By doing this, you can avoid driving uninsured and violating the finance contract right after it is signed.

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How long will a newly acquired car be covered without insuring it?

You cannot drive off of the lot covered and then go for joy rides for an extended period of time without calling your agent and adding your car.

Coverage will only extend for a short period of time, but the duration depends on which company you are insured with and what state you live in.

In most states, you will have at least 4 days of automatic coverage when you have traded in one vehicle for the new vehicle.

This is typically the shortest amount of time you are given.

The more lenient companies will offer you no less than 14 days and no more than 30 days to notify them that you have purchased a new car and add it to the policy before the coverage will drop off.

If you do not add the vehicle within this time period but you do register it, you may have issues with the Department of Motor Vehicles that can cause major headaches.

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What happens when you do not have existing car insurance?

If you are buying your first car or you have moved out of state and are careless, you may be on the car lot with no existing car insurance in place.

This poses issues because you will technically be considered uninsured when you get behind the wheel.

While the car is covered for test drives under the dealerships commercial insurance, the ownership is signed over that coverage no longer applies.

It can be tempting to just get out of that finance office and take your chances, but most responsible dealers will not let you drive home when you have not previously arranged protection.

If you do not have your own policy, they will connect you with an agent who will quote you coverage and provide you with immediate protection for a deposit.

This is often the only way you will get the keys when you are not prepared.

Why it is Best to Be Prepared

Without knowing the rules or coming with a policy arranged, you are forced to buy insurance from the companies that the dealer does business with.

They may not be the best or the most affordable policies. Preparation can save you time and money.

The best way to prepare is to start retrieving quotes from several different companies so that you can comparison shop.

The quickest way to comparison shop is to use an online tool that gives you access to rates with more than one insurer from your region.

By using these special online tools, you can shop for your coverage before you even sign a vehicle contract and then bind the coverage from your Internet-ready device by clicking a button.

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