Buying a New Car: An Insurance Checklist to Review Before You Drive Off
Buying a car is exciting, and insurance is easy to push to the end of the to-do list. It should not wait, because you usually need coverage in place before you drive the car away. This checklist covers what to review.
Before You Buy
- Call your insurer or agent early. Ask how adding a vehicle affects your premium. The make, model, trim, and safety features can all influence your rate.
- Ask about the vehicle. Some vehicles cost more to insure because of repair costs, theft rates, or claim history.
Coverage to Review
Liability coverage. This pays for damage you cause to others. A more valuable car does not change this, but your limits should still reflect your situation, including your assets and your state's requirements.
Collision and comprehensive. These pay to repair or replace your own car. Collision covers crashes, and comprehensive covers events such as theft, vandalism, fire, and weather. Lenders usually require both on a financed or leased vehicle.
Gap coverage. If you owe more on the loan than the car is worth, a total loss claim may not pay off the loan. Gap coverage can help cover the difference. Ask whether it is offered through your insurer and compare that to what the dealer offers.
Roadside assistance and rental reimbursement. Optional add-ons that may be worth considering depending on how you use the car.
Lender or Lease Requirements
Financed and leased cars usually come with insurance requirements, such as maximum deductibles or specific coverages. Check your loan or lease agreement so your policy meets them. A policy that does not meet the requirements can lead to the lender buying coverage on your behalf, which tends to cost more.
Paperwork You May Need
- Proof of insurance for the dealer or lender
- The vehicle identification number (VIN)
- The purchase date and the date you want coverage to begin
- Lienholder information, if the car is financed
What About the Car You Are Replacing?
If you sell or trade in your old car, tell your insurer so coverage on the old vehicle ends and you are not paying for a car you no longer own. Many policies include a short grace period for a newly acquired vehicle, but the length and terms vary, so confirm with your insurer rather than assuming.
After You Buy
Keep your registration, insurance card, and loan documents in a safe place. Our guide to moving to a new state is useful if you are also relocating with the car.
Sources and Further Reading
Frequently Asked Questions
Do I need insurance before I drive a new car home?
Generally yes. Contact your insurer before the purchase so coverage can start when you take possession.
What is gap coverage?
It may cover the difference between what you owe on a loan and the car's value if it is totaled.
Will a newer car cost more to insure?
Often, but it depends on the vehicle, your driving record, and your location.
Do I have to keep collision and comprehensive?
Lenders usually require it while the car is financed or leased.