Have you been doing some car shopping? It’s always an exciting moment when you’ve settled on the perfect car. Hopefully it’ll be the car that you can rely on for commuting and for road trips with friends and family.
But before you drive your new car off the lot, have you thought about car insurance?
Insurance is one of the most important factors when it comes to buying a car. But how does auto insurance work?
You’re required to have it by law and it’s an expense to consider when you’re adding up the total amount of money you’re spending to own a car.
So do you need insurance before you buy a car? Here are a couple scenarios to consider:
Do you already have car insurance and you’re replacing your old car?
It depends on the insurance company you’re with, but your existing policy on your old car could cover your new vehicle.
And if you have multiple vehicles already listed on your policy, it’s possible that your new car will have the same level of coverage as your highest protected vehicle on your policy.
In some cases, it might be as easy as calling up your insurer to update your current policy with the details of the new car while you’re at the dealership. Some of the bigger insurance carriers even let you do this online instead of over the phone.
And some insurance providers extend coverage for your new car, but with restrictions. For example, coverage might extend to your new car only from the drive from the dealership to your home. From there, you should make changes to your policy after you get home.
Other carriers will only cover you up to a certain number of days after you’ve bought your new car. After that, it’s up to you to contact your insurer to update your policy.
Since it varies so much between insurance companies, your best best is to ask your insurer what you should do.
Consider updating your coverage
Let’s say your new car is good to go under your current insurance policy. You can definitely rely on that in the beginning, but it might not make sense to keep doing that.
Your new car is worth more than the older insured car. Without updating your coverage, you run the risk of your new car being underinsured while it’s covered under your old policy.
For example, maybe you are replacing an old car that didn’t make financial sense to have collision and comprehensive insurance on it. So you decided to stick to a liability-only policy. If you get into an accident in your new car, repairs to your car won’t be covered. You’ll have to pay out of pocket.
Or since it’s a brand new car, you might want to consider adding new car replacement insurance. If you get into an accident and your new car gets totaled, the insurance company will give you the money for a brand new car of the same make and model and not for the depreciated value of your car.
Expect a premium change
Don’t be caught off guard by a premium change. It’s common when you’re updating coverage for your new car.
Your premium will also change based on the make and model of your new vehicle.
Is this your first car?
If this is your first car under your name, you should have coverage on it before you leave the dealership lot. If this is your situation, ideally, you’d get insurance before you buy the car.
You can get insurance and schedule it to be activated on the day you’re buying the car from the dealership. This way you can legally drive off in it the same day you buy it.
If you’re planning on buying insurance right then and there, you can do that too. You could do it online or call an insurance agent.
Wondering if you can stay on your parents’ car insurance? If the car is owned and insured under their name, then yes. But if it’s under yours and you’ve moved out? You have to have your own policy.
But don’t get car insurance in a rush
If this is your first time getting car insurance, don’t do it hastily. You can definitely get coverage this way, but you might not understand the ins and outs of your policy.
There’s a chance you’re not choosing the appropriate coverage limits for your car and you might even miss out on some key types of car insurance that are optional, but handy to have, like roadside assistance.
Do you need insurance before you buy a car?
You don’t necessarily need car insurance to buy a car. But you do need it to drive it off the lot.
But whether you’re replacing your old car or buying a car for the first time, don’t leave your insurance until the last minute. It’s best to get everything sorted out with your car insurance before you head to the dealership.
You want to make sure you’ve got the proper coverage. You never know what can happen when you’re driving your brand new car home. If you get into an accident and your coverage isn’t enough, well, you’re out of luck.
You’ve been shopping for cars, why not shop for insurance, too?
Buying a new car is actually the perfect time to shop around for insurance. If you give yourself more time than to hastily get car insurance at the dealership, you can potentially get a better deal on rates.
Take some time to get quotes from various insurance companies and figure it out from there. If you already have car insurance, you can plan ahead to switch car insurance companies and cancel car insurance with your current carrier.
You’re already spending quite a bit of money on your new car, so you might as well find savings where you can!