Buying a car this weekend? Learn how to get your new vehicle covered
Last updated: January 1
Thinking about doing some weekend car shopping? Make sure to call your car insurance agent before you head to the dealership, so you have all the information you need before you buy a vehicle. You won't be able to drive that new car off the dealer's lot until you can prove it's covered by your insurer. Some insurance companies may offer an insurance grace period for new cars, but this can vary from state to state. There are a couple of scenarios to consider:
If you're buying a new car, but not replacing your old one... Make sure you have liability coverage
Every state except New Hampshire requires drivers to have liability coverage, according to the Insurance Information Institute (III). Typically, liability coverage helps protect you, as the driver or policyholder, if you're at fault for an accident and you hurt someone or damage someone's property as part of a covered incident, according to the III. (In New Hampshire, drivers must show they have sufficient funds to cover any losses in an "at-fault" accident. In Florida, the required insurance includes property damage liability and personal injury protection.)
If you're replacing your old car... Can you apply your current policy?
If you decide to purchase a new or used car during the weekend and your insurance agent isn't available to set up coverage for your new auto, some insurers provide a grace period. You should be able to take possession under the following conditions, according to Laura Peterson, communications coordinator at the National Association of Insurance Commissioners (NAIC):
- You already own an insured vehicle;
- You are paying cash;
- You have a clause in your policy granting a certain time frame to report a new purchase.
The types of coverage and their limits for your new vehicle will match what's listed on your policy for your old vehicle until you update your policy to include any additional coverages you need for your new vehicle. If you only carry liability for your old vehicle, you will not have collision coverage or comprehensive coverage for the new one until you add those coverages, says Peterson.
Find out coverage requirements for financing or leasing a car
The scenario may change for those who are financing or leasing a car. Typically, you will have to show proof of insurance to your dealer to be able to take possession, according to David Kelleher, senior property and casualty insurance specialist at the NAIC. In this case, a weekend car purchase could delay your ability to drive home in your new vehicle if you have not arranged specific coverage for that vehicle in advance.
If you only carry liability coverage on your current vehicle, the dealer is likely to require you to add collision and comprehensive to help ensure the lender's risk is sufficiently covered, says Peterson.
Read the fine print for your new or used car loan or lease
Leasing contracts also may contain a so-called "forced place" clause. This allows the leasing company to arrange for insurance and add it to your monthly fee, if you don't provide proof of insurance within a specified window, says Kelleher.
You may also want to consider buying GAP coverage if you're financing or leasing your car. this helps cover the difference between what you owe on your vehicle and what your vehicle is worth at the time of an accident or theft.
Does car insurance cover test drives?
If you're test driving a car with the intent to purchase it for your personal use, most insurers cover you for the use of "non-owned cars" (test-drive vehicles and loaners).
However, dealers are required by law to insure their cars, and that insurance would typically cover an accident that occurs during a test drive. Keep in mind, though, that in some instances, a dealer's insurer may seek reimbursement from you or your insurer if you cause an accident during a test drive.
When you test-drive a privately owned vehicle, the same rules hold: The car owner's insurance typically covers damage to the car during your test drive. In that case, you would be considered a "permissive driver" and generally wouldn't be on the hook for repairs. It's a good idea to confirm that the owner has an insurance policy on the vehicle before you take it for a test drive.
When it comes down to it, if you know you're in the market to buy a car and you're planning on visiting a dealership over the weekend, consider talking to your insurer to confirm that you're prepared to make a purchase should you find that perfect vehicle.