How soon do you need insurance after buying a car?

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Here's what you need to know...
  • When you buy a car from a dealership, the sales agent will ask to see proof of insurance before you can take possession of the car and drive it away
  • If you don’t already have an existing policy, some dealers will refer you to an agent that they deal with so that you can bind insurance quickly. This insurance is often very expensive because consumers will be paying for the convenience
  • When you already have a standard insurance policy on a vehicle that you own, the new car will be covered under the existing contract automatically. Coverage will extend for either 14 days or for the remainder of the term if you’re trading your car in
  • Under your current insurance, the car will be covered with the broadest form of coverage that you carry. You’ll only have full coverage for 4 days if you have a liability-only plan
  • It’s your legal responsibility to comply with mandatory insurance laws as soon as you buy a car. When you sign the bill of sale and transfer the registration in your name, you’ll need to show that you have insurance

If you buy a car from a dealership or from a private seller, you need to be sure that you have insurance in place as soon as the transaction is complete.

While research, test drives, and negotiations take time, the entire process could be delayed if you forget to walk into the finance office with your insurance in order. The last thing you want to do is spend more time trying to buy a new or used car.

Auto insurance is something that most states have made mandatory. Since there are compulsory insurance laws 48 out of 50 states, it’s important that you know how much insurance you must buy, when you must buy it, and where you’re expected to buy your coverage from.

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Auto Insurance is Mandatory in Most States

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If you’ve ever owned a car, you know that auto insurance is usually mandatory. What many consumers don’t know is that the type of coverage that’s required is set by state officials and not federal officials.

While there is a national agency that’s called the National Association of Insurance Commissioners, it’s the state legislature that decides how much insurance is required.

Since auto insurance bills are passed at a state level, the type of coverage and the limits that you must carry will vary depending on which state you call home.

In most states, you must have at least some third-party liability coverage to pay for property repair bills and doctor visits when you damage property or hurt a person in an accident.

When are you responsible for insuring a car?

You don’t have to insure just any vehicle that you drive. When you’re test driving a car or borrowing a vehicle, it’s not your legal duty to buy insurance for it.

It’s not until you take ownership of the car and you have an insurable interest in it that you need to purchase a policy on the vehicle. Registered vehicle owners must comply with their state’s insurance laws.

While you might not get your vehicle registration right away, as soon as you sign a bill of sale, the original owner of the car can submit a release of liability request that includes your information as the purchaser. At this time, the state holds you responsible for complying with insurance laws.

You should never drive without insurance. Doing so can result in severe legal consequences including fines and registration and/or license suspension.

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Can you drive your new car without auto insurance?

You can test drive a vehicle on the lot without having your own personal car insurance, but you can’t drive the car home without securing a policy. It’s the dealer’s responsibility as a responsible place of business to check and see if someone who buys a car has insurance.

If the buyer were to drive off without coverage, it would put hundreds of drivers and pedestrians at risk of hurting someone without any type of protection.

This is one of the main reasons why the agent that you’re working with will ask to see a proof of insurance before they give you the key.

Can you drive a car you buy from a private seller home without insurance?

Private sellers don’t have a license to sell cars. This is why they aren’t legally obligated to take a copy of your insurance before you drive away with your new car.

Just because the seller doesn’t have to ask for proof doesn’t mean you don’t need to have insurance in place.

Just like when you buy a car from a dealer, you need to have insurance on a car that you buy from a private party before you drive it off the lot. As long as you’ve signed a bill of sale and the car is in your name, it’s your legal duty to buy insurance on it to avoid some hefty fines.

You should not test drive a car for sale by private owner if they cannot produce proof of insurance. Since you’re the one driving it, if they aren’t covered, you could face lawsuits in the event of an accident.

Do you need to buy a new policy on the car if you have existing insurance?

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You don’t always need to rush to buy auto insurance when you’re going car shopping.

If you already have a personal car insurance policy on a vehicle that’s registered in your name, that policy can protect you for a fixed period of time. It gives you a little time to contact your agent and shop around to see if you can find better pricing elsewhere.

How long does your existing insurance protect you?

Every state has different rules when it comes to providing coverage for a newly acquired vehicle. Newly acquired vehicles are considered covered autos, but in some scenarios, you don’t have very long to add the new car before there’s a coverage lapse.

Here are the time frames:

  • If you’re buying an additional car, it will be covered for 14 to 30 days
  • If you’re buying a replacement car, it will be covered for the remainder of the term
  • If you need full coverage and you don’t have it, you’ll get 4 days of comprehensive and collision coverage

It’s wise to start shopping for insurance before you go on a mission to find the right car. Use an intelligent online comparison shopping tool and you can get instant rate quotes from all of the leading car insurance carriers.

Enter your zip code below now to find car insurance rates that work with your budget!

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