New Car Insurance: When You Need It And How to Get It
Before you drive your new car off the dealership lot, you'll need to show you have car insurance that meets your state's requirements.
If you already have insurance for another car, you'll usually have a period of time to add the new car or transfer the policy.
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When to buy new car insurance
You need to show you have car insurance before you leave the dealership with your new car.
This means different things if you already have a car insurance policy or not.
- If you don't already have car insurance or you're changing insurance companies, you must purchase a new policy before you drive your car home. You can't back-date insurance to apply retroactively.
- Drivers who already have a car insurance policy and are staying with that company can usually use the grace period of their existing plan. This temporary coverage lets you drive off the lot using your current policy so you can update your coverage later.
Insurance grace period when buying a new car
A grace period lets you use your current auto insurance policy to have temporary coverage for a new car. This covers your new car up to the cash value of your old car.
- How long is it? A grace period is usually between a week and a month, based on your policy. For example, Progressive gives drivers 30 days to add a new car to their policy, while other companies may give you less than a week.
- What coverage do you get? Coverage limits are usually based on your current policy.
Even if you're eligible for a grace period, you can still shop for insurance for your new vehicle during the car-buying process. This will ensure that your new car is fully covered for its value.
If you did use the grace period, don't forget to add your new car to your policy before your grace period is up. Even a short lapse in insurance coverage can make a lasting impact on your insurance rates.
How much does new car insurance cost?
Insurance for a new car costs about 10% more than for a four-year-old car with the same make and model.
How much you pay for a policy depends on the car you're buying, as well as your age, driving history and other factors.
Newer cars are generally more expensive to insure than older ones because they are worth more and cost more to repair or replace.
However, a new car's safety features — such as lane assist, backup cameras and blind-spot warning — can reduce how much more you pay to insure a new car.
Best car insurance companies for new cars
State Farm has both affordable prices and good customer service, making it the best auto insurance company for new cars.
Company |
Rating
| |
|---|---|---|
| State Farm | |
| Erie | |
| Farm Bureau | |
| Auto-Owners |
USAA is only available to current and former military members and their families.
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How to save on insurance for a new car
Shopping around for the cheapest rates is the best way to save on car insurance.
So when you're shopping for cars, collect multiple quotes online or call your insurance agent and have them pull quotes for you as part of your research.
In particular, drivers looking to save money on insurance for a new car should look for discounts based on their car's safety add-ons, such as advanced collision detection or anti-lock brakes.
How to get auto insurance for a new car
Auto insurance is required in nearly every state, and new cars are no exception. When buying insurance for a new car, start by comparing quotes from different companies. Then you can apply, pay and get your insurance card.
1. Get multiple quotes for the car you're considering
Even if you haven't chosen a car yet or you change your mind at the dealership, comparing estimates from multiple insurance companies could help you reduce your monthly bills.
All you need to know to get a car insurance quote online is the car's year, make and model.
- Year
- Make
- Model
2. Apply for a policy when you know the car you want
You need to know exactly which car you're buying to get a policy. This customizes your rates based on your car's features and the exact coverage you need.
To apply for new car insurance, you might need:
- The car's VIN
- What coverage is required by your financing or leasing company.
- How you'll be using the car, such as for leisure, commuting or ridesharing.
- The date of birth and driver's license number of all drivers who will be on the policy.
- Your home address, or the address where you'll keep the car.
You can complete the process entirely online or over the phone. Remember to check which discounts you may qualify for.
3. Pay for the policy and get proof of coverage the same day
You can pay for the insurance plan online or over the phone using a debit or credit card. Insurance companies typically send you proof of insurance immediately after you buy a policy.
If you're purchasing in advance, you can set the date for when the new policy will begin. Most insurance companies also offer same-day car insurance so you can insure your new car immediately.
Every insurance company works differently, so if you can, check with the insurer before you head to the dealership to buy the car.
What insurance do you need when buying a new car?
Most people should get full-coverage insurance for a new car.
A full-coverage policy covers damage to your new car, as well as damage and injuries you cause to other cars and people. The car insurance policy will need to meet a few key requirements.
- Requirements of the car leasing or financing company: You'll usually need comprehensive and collision insurance to cover the value of the car. The lender or leasing company still owns the vehicle and wants it to be protected if it's totaled.
- Requirements of your state: Each state sets its own auto insurance requirements. You'll only be able to buy a policy that meets your state's requirements, so your plan may automatically include uninsured motorist coverage or personal injury protection (PIP).
New car replacement and gap insurance
New car replacement insurance and gap insurance are additional coverages for new cars to give you the most financial protection. It's usually optional, but sometimes a leasing company requires gap coverage.
If your car is totaled:
- Gap coverage pays the difference between your car's actual cash value and how much you owe on the loan or lease. For example, let's say your car is totaled in a collision. The car's actual cash value is $20,000, and you owe $22,000. Your insurance policy's collision coverage would reimburse you $20,000. Gap coverage would pay the remaining $2,000 you owe, so you're back at square one: you don't own a car, but you also don't owe your lender any money.
- New car replacement coverage pays for the cost of an entirely new car that's equivalent to the one you had. Let's say you purchased a new car for $25,000, and it's worth $20,000 when totaled in a collision. Your collision coverage would give you $20,000 and new car replacement coverage would give you $5,000 — enough for you to buy a brand-new vehicle.
Frequently asked questions
Which insurance is best for a new car?
State Farm usually has the best combination of cheap rates and customer satisfaction. Comparing quotes can help you find a good deal for your situation. Full-coverage car insurance is the best policy for new cars. This means that the insurance company will pay for damage to your car if you cause an accident or a tree falls on your car, for example.
Does insuring a new car cost more?
Car insurance for a new car costs about 10% more than for a four-year-old car of the same make and model. New cars are usually worth more, and are therefore more expensive to insure. You may also be required to have additional insurance beyond liability coverage, which can add to your costs.
When should new car insurance start?
The insurance policy for your new car should start the day you buy the car. You'll need insurance before you can drive off the lot. You may also be able to use the grace period of your current plan as temporary coverage and get your new car policy within the first seven to 30 days of ownership.
Methodology
The difference in insurance costs for a new car versus a four-year-old car is based on full-coverage policies for an automatic Honda Civic with base trim. Thousands of quotes were compared from the largest insurers across Illinois.
ValuePenguin's analysis used insurance rate data from Quadrant Information Services. These rates were publicly sourced from insurer filings and should be used for comparative purposes only — your own quotes may be different.
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