Although it may be possible to buy a car without insurance, most dealerships require that you have insurance coverage before you can drive off in your new vehicle.
All states, except Virginia and New Hampshire, require car insurance. If you live in a state where car insurance is required, you must show proof of insurance. To be legally insured, your car insurance policy must meet the minimum car insurance requirements in your state.
Here’s what you need to know about insurance coverage when you’re shopping for a new car.
When should I buy insurance for my new car?
If you don’t currently have car insurance, you’ll need to buy a policy before you can drive your new car.
If you already have a car insurance policy, you can show your policy at the dealership as proof of coverage. This will allow you to buy a car, but you’ll still need to contact your insurance carrier about your new purchase. Most insurers offer a grace period of seven to 30 days to inform them of a new vehicle.
However, even if you have coverage, it’s wise to tell your insurance company that you plan to get a new car before you buy. Since new vehicles are generally worth more than older cars, your new car insurance premium will probably be more expensive. You’ll want to factor the new premium into your budget ahead of time.
Another reason to talk with your insurance company before buying your car? The dealership may try to upsell you on various insurance and other financial products. It’s a good idea to already have an insurance policy you feel confident about, so you won’t be persuaded to pay more for extras.
How to buy auto insurance without a car
If you don’t have car insurance, you’ll need to get a policy before you drive your new car. It might sound odd to buy insurance for a car you don’t own yet, but it’s pretty straightforward:
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Know your make and model. Take some time to compare cars and identify the vehicle you want.
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Gather information about your vehicle of choice. To buy an insurance policy, it can be helpful to know the vehicle make and model, vehicle identification number, or VIN, mileage and your driving record. If you don’t know the VIN or mileage, you can tell your insurer the make, model, and year of the car you plan to buy (such as a 2022 Toyota Camry).
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Compare insurance quotes. It might be tempting to go with the first insurer you come across, but it can be worth it to shop around. Check out NerdWallet’s car insurance comparison tool to find the best rates for your auto insurance needs.
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Submit an application. Once you choose an insurance company, it’s time to apply for your policy. Depending on the insurer, you may be able to complete the application process online. However, if you don’t know the details of the car (like the VIN), you’ll likely need to complete your application over the phone with a customer service representative.
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Purchase your vehicle. Once you have proof of insurance, or a carrier willing to cover you, you’re all set to head to the dealership and buy your new car.
How much is new car insurance?
New cars have more features (like backup cameras and Bluetooth speakers) than older cars and typically have higher values than used cars. New cars are also more expensive to repair. It’s likely that a new car insurance premium will be more than the premium for your previous vehicle.
According to NerdWallet’s 2022 rates analysis, the average annual cost to insure a new car is $1,630 for a good driver with good credit.
How much insurance do I need for a new car?
If you are leasing your car you’ll also be required to have gap insurance. If you total the vehicle or it’s stolen, gap insurance pays for the difference between the balance of your car loan and the value of your car, which can be thousands of dollars. Without gap insurance, you’re responsible for paying the difference.
If you don’t have a loan or lease, the policy must at least meet your state’s minimum car insurance requirements. Though purchasing state minimum coverage is usually the cheapest option, you’ll likely want more coverage for a new car. The reason? It’s expensive to repair damage to a new vehicle, and even more expensive to replace one entirely. You don’t want to be left without cash after a crash.
Gap insurance example
For new car owners, gap insurance is a smart purchase that can save thousands of dollars. If you lease, gap insurance will likely be required by the contract. Those who have a car loan should consider gap insurance as well.
Let’s say you owe $30,000 on your car loan, but the value of your car is $25,000. If your car is totaled in a crash, collision insurance will pay for the value of your car, minus the collision deductible. If your collision deductible is $500 dollars, then collision insurance will pay $24,500. But, you would still be on the hook for the remainder of your car loan. Without gap insurance, you would owe the lender $5,500.
Gap insurance pays for that last $5,500, minus your gap insurance deductible. If your gap insurance deductible is $500, insurance will pay your lender $5,000, leaving you to pay $500.
Comprehensive insurance pays your lender |
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Amount still due on loan after insurance claim payout |
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With gap coverage, driver only pays deductible |
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Without gap coverage, driver pays deductible and pays off auto loan |
Smart coverage options for new car owners
If you don’t have a car loan or lease, you should still consider purchasing more coverage than the minimum for a new car. Here are some other coverage options you may want to add.
Comprehensive and collision coverage
Comprehensive insurance covers you for things such as fire, hail, vandalism and theft. Comprehensive insurance will pay up to the value of your car, minus your deductible, if your car is damaged or totaled in a covered incident. A deductible is a set amount subtracted from any claim payout. If you have a car loan or lease, comprehensive coverage will probably be required by your lender.
Collision insurance covers you for damage related to crashes with objects or other vehicles. Collision insurance will pay up to the value of your car, minus your deductible, if your car is damaged or totaled in a covered event. If you have a car loan or lease, it’ll probably be required by your lender.
New car replacement coverage
If your car is totaled in a covered incident, comprehensive and collision insurance will pay for the actual cash value of your vehicle, minus your deductible. However, because cars depreciate quickly from the time of purchase, your $30,000 car may only be worth $25,000 when you have an accident.
Unlike comprehensive or collision, which would only pay $25,000 minus your deductible, new car replacement coverage will pay for how much it costs to replace your vehicle with a car of the same make, model and value, minus your deductible.