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If your holiday season’s gift plans include a shiny new ride, don’t get so wrapped up in the big red bow for the hood that you forget about car insurance. Whether you’re buying a factory-fresh vehicle or a “new-to-you” used car, the dealership won’t let you drive home to your holiday lights until car insurance is in place.
You might transfer an existing auto policy, or you may need to purchase a new car insurance policy. Either way you’ll want to make sure you obtain the right level of coverage for a budget-friendly price.
Learn more: How does car insurance work? The basics explained.
How to get insurance for your new ride
The process of securing auto insurance for your new vehicle will be different depending on whether or not you already have a car insurance policy or not.
If you’re not already insured
If you're buying a car and don't have an existing auto insurance policy, you'll have to purchase insurance before you'll be able to close the deal.
Before heading to the dealership for a test drive, get insurance quotes for your desired make and model. Most insurance companies allow you to get quotes with basic details about the vehicle — you don't need the vehicle identification number (VIN) — so you can see which company offers you the best coverage and rates.
Your car insurance premium will depend on several factors, including which insurance options you choose and your coverage limits. Different insurers offer different prices so it pays to shop around.
Learn more: Cheapest car insurance in the U.S.
Once you've found coverage that matches your needs and budget, make a note of the insurance company's name and contact information. Then, you can go to the dealer to finish the purchase. Typically, the dealer will allow you to call the insurer from the financing office to activate your new insurance policy. Or, you can use your mobile phone to purchase some policies directly through the insurer's website.
You can pay for your policy with a credit card, and your policy will go into effect in minutes. And, the insurer can send proof of insurance to the dealer so you can drive your new vehicle the same day.
Expert tip: You must buy at least state minimum coverage for your new car, but if you want added protection look for a full coverage policy. Lenders will require it, but cash buyers usually also want it to cover their car in the event of theft, damage from an accident or other problems such as striking an animal, fire, or severe weather.
Learn more: Minimum car insurance requirements in every state
If you're already insured
If you have an existing auto insurance policy and purchase a new vehicle, you have a bit more time to handle insurance. When you buy a new car, your existing insurance will usually cover your new vehicle — at the same coverage levels you previously had — for a limited time. This period, known as your policy grace period, varies by insurer. In general, you have seven to 30 days to update your policy with your new vehicle.
Learn more: Got a new ride? Here's how a new car insurance grace period works
Before the grace period ends, you'll need to update your insurance policy with your new vehicle information. Depending on your coverage and the vehicle you purchased, you may also need to change your coverage, too.
With an existing policy, you may be able to buy a car and drive off the lot by showing the dealership proof of insurance and signing a form committing to insuring the vehicle.
However, you should check with your insurer before completing the purchase to make sure your coverage extends to a new car or additional vehicle. If it doesn't, you'll have to purchase insurance before you can leave the dealership.
When you transfer coverage to a new vehicle, your premium will likely change since the value of your new vehicle will differ from your old one. This is true even if you don’t adjust coverage amounts. Of course, if you change the types of car insurance you carry (e.g., adding comprehensive car insurance when you had only liability coverage before) or the policy’s deductible, those adjustments will affect your premium as well.
Learn more: What you need to know about car insurance deductibles
Be aware that if you have non-owner car insurance, that policy won't meet dealership or state insurance requirements. Non-owner policies don’t provide any coverage for the vehicle, only secondary liability coverage, so you'll need to purchase a standard auto insurance policy before the deal can be completed.
How much coverage do you need for a new car?
When purchasing a new vehicle, it’s more important than ever to ensure you have the right coverage levels because the cost of replacing or repairing your newly purchased vehicle is high.
To help determine the right level of coverage, ask yourself these questions:
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Am I financing my new car purchase? If you're buying a new car with an auto loan, your lender will likely require you to have full coverage, meaning a policy that combines liability, collision, and comprehensive insurance. For those who only have liability insurance, you'll need to purchase additional coverage to meet the lender's requirements.
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How expensive will it be to repair or replace my new car? If you traded in an older or high-mileage car, you may have skipped optional coverages like collision or comprehensive insurance. But with a new car, those forms of coverage can provide critical protection if you're in an accident and your car is damaged or totaled.
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Do I need higher coverage limits? Your insurance needs change over time. If you have grown your assets, you should consider adjusting your liability coverage limits to protect yourself.
Learn more: How much car insurance do I need?
What type of coverage do you need for a new car?
These are some of the most common forms of insurance that can help protect your new car (and your wallet):
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Liability insurance: Liability coverage pays for damage you cause to other vehicles, along with medical expenses for drivers and passengers when you’re at fault in an accident. In almost all states, you need a minimum amount of liability coverage to legally drive.
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Comprehensive insurance: Comprehensive is optional coverage that pays for certain types of damages to your personal vehicle that don’t involve a collision (e.g. theft, vandalism, storm damage, etc.). If you finance or lease your vehicle, the lender will typically require you to carry this type of coverage.
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Collision insurance: This covers the cost of repairing or replacing your personal vehicle if you’re in an accident. If you finance or lease your vehicle, the lender will typically require you to carry this type of coverage.
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Personal injury protection (PIP) insurance: PIP can help pay for medical bills for yourself and your passengers in the event of a covered accident.
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Full coverage insurance: Full coverage is a policy that combines liability, collision, and comprehensive insurance. In states where PIP is required, full coverage policies include PIP, too.
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Uninsured/underinsured motorist protection: If you're in an accident with someone who doesn't have insurance (or whose coverage limits are too low to pay for the damages), uninsured or underinsured motorist protection helps cover the cost. This form of insurance is required in some states, but many other states allow drivers to add it to their coverage as an optional add-on.
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Gap insurance: If you financed your car and put down a small down payment so that you owe more than the value of your car, you may need gap insurance. Gap insurance pays for the difference between your auto loan balance and your car's actual cash value if it's totaled or stolen.
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New car replacement: This coverage replaces your car with the same make and model from the current year if your new car is totaled within the first few years of ownership. Rules vary by insurer, but coverage typically lasts one to two years, and the car’s mileage must be below a certain threshold – such as 15,000 miles for one year.
Tips for insuring a new vehicle
Follow these tips to help you get the new-car coverage you need while keeping your insurance costs down.
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Shop around: Whatever type of insurance you decide to buy, it’s smart to get quotes from multiple insurance companies. Comparing auto insurance quotes (just as you should during the car shopping process) can be a great way to find affordable car insurance.
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Assess your coverage needs: Your insurance needs for a new car may differ from an older vehicle. For example, you may need to add collision and comprehensive insurance to your policy if you have liability-only coverage.
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Go beyond the minimum: Most states require you to carry basic liability insurance that covers other drivers if an accident takes place. Often denoted as three numbers, such as 25/50/25, those numbers mean you need at least $25,000 in bodily injury protection for one person per accident, $50,000 in bodily injury protection per accident, and $25,000 in property damage liability per accident. Yet, that may not be enough to financially protect you after a major accident. In general, experts recommend maintaining coverage that meets 100/300/100 limits.
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Determine whether you need gap insurance: If you finance or lease your new car, gap insurance is an optional form of coverage that can provide protection, particularly if you had a small down payment or if you're purchasing a vehicle that depreciates quickly.
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Consider additional coverage: In addition to the requirements when you finance or lease a car, you may want even more added coverage options, such as roadside assistance, rental car coverage, or custom parts and equipment insurance.
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Look for discounts: Many insurance companies offer discounts that can save you money. Ask your insurance agent about available discount programs like usage-based insurance or pay-per-mile policies, multi-policy discounts, or safe driving discounts.
Learn more: Car insurance rates are climbing. Here are 4 reasons why and 11 ways to save.
New car insurance FAQs
Can I buy a car without insurance?
No, you cannot buy a car without having insurance coverage in place. State laws and dealership policies prohibit you from getting behind the wheel without a policy that, at a minimum, meets your state's liability insurance requirements.
Learn more: What happens if you don’t have car insurance?
What documents do I need to get insurance for a new car?
When you set up new car insurance (or switch your existing coverage over to a new vehicle), your insurance company will need some basic information, such as:
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Vehicle identification number (VIN)
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Title information
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Financing or leasing details
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Driver’s license
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Vehicle inspection or appraisal (in certain circumstances)
Do I need full coverage for a new car?
Although not legally required, you may need a full coverage policy if you financed or leased a new vehicle; it's typically a lender requirement. But, full coverage can still be a smart idea if you paid cash. It will provide coverage for your vehicle against damages and theft.
How fast can I get insurance after buying a new car?
Many companies allow you to shop for coverage and purchase a policy online within minutes, so you can buy a car and get a new car insurance policy on the same day. However, it’s wise to ask the car insurance company you plan to buy from before you show up at the dealership to pick up the car. You don’t want to find out that it takes hours or days instead of minutes with that particular insurer.
If I trade in a car, does my old coverage transfer?
If you have an existing policy and trade in your car for a new one, your policy may automatically apply to the new car. But you'll have to provide the updated vehicle information to your insurer, and you may need to adjust your coverage limits.
Learn more: How to renew your car insurance policy or switch to a new one
Do all insurance companies have grace periods for new cars?
No, not all insurance companies offer grace periods for new cars, so policyholders need to contact the insurer and update their vehicle information before they can close the deal on a new car.
Tim Manni edited this article.
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