One item that car shoppers might overlook in the whirlwind of car shopping is car insurance coverage for their new vehicle. If the car purchase is a replacement for an old vehicle, a car insurance grace period can come to the rescue. However, when it's a first time purchase or if there was a lapse in insurance coverage, you will need current car insurance to drive off the dealership lot. We’ll cover the insurance requirements and grace period for adding a new vehicle to your current policy, buying your first car, and leasing a car.
Adding a Vehicle to Your Policy
If you're buying an additional vehicle or replacing a car that's currently covered on your policy, you'll usually have some leeway to add it to your current insurance plan. The time between when you buy your car and add it to your policy is called a "grace period". Grace periods vary between insurance companies and even between individual policies.
Typically, grace periods fall between 3-30 days and offer the exact same coverage for the newly purchased vehicle that you had for your old vehicle. For example, Progressive offers a 30-day grace period for adding a new vehicle. If you have a claim within that timeframe, the new car will be treated like your old car.
Although the grace period gives you some flexibility, you should aim to get your new car onto your insurance policy as soon as possible. If you let it drag out too long and forget to add your vehicle before the grace period expires, your policy won't apply and you can land yourself in a costly situation. You should contact your insurance agent as soon as possible after your car purchase to add it to your coverage or you may be able to do it on your own through your online account.
Insuring a First Time Car Purchase
If you're buying a car for the first time or have gone for a while without one and let your coverage lapse, you will need to plan ahead when it comes to auto insurance. In every state except New Hampshire, it is illegal to drive a car without liability coverage. This means you won't be able to drive your shiny new car off the lot without it - not the ideal situation. Because there is no "grace period" when you buy a new car without previously having insurance, it will take some planning.
To make sure you're prepared, you'll want to research car insurance companies and select one before going to the dealership. If you plan to purchase a car over the weekend, it's a good idea to purchase the insurance before you purchase the vehicle. You'll be able to do this as long as you know which car you're buying and obtain information like the VIN and the vehicle's purchase price. Many insurance companies offer hotlines for you to call and purchase a policy on a weekend, but you'll want to confirm during regular business hours.
Financing or Leasing a Car
The above guidelines apply to the process of buying a new or used car outright, but the insurance requirements may be different if you are financing or leasing your vehicle. According to Allstate, the dealer can require more than just liability coverage if you're leasing or financing a car, and you may be required to add on collision and comprehensive coverage.
When you buy a car outright, you're only mandated to have liability coverage. When you take out a loan to pay for your new car, you will usually need to add comprehensive and collision coverage which protects you and the lender if the car is seriously damaged before you pay it off. If you're financing a vehicle, the grace period to add it onto your policy may not apply. Check with the financing company and your insurance about the requirements. You may need to have the car covered by your insurance policy before you drive it off the lot.
Leasing a vehicle requires you to have car insurance just like buying, and leasing companies will typically require you to have higher liability limits. Even if you had a policy for the vehicle you're replacing with the lease, you'll likely need to update your policy for more coverage. The leasing company will also require you to add collision coverage to help pay for repairs if the vehicle is damaged by you or another party. Additionally, comprehensive coverage will be required for any non-collision events like the theft of the vehicle. Make sure to carefully review your lease terms to see if Gap insurance is included in the lease or if you need to add it on.