The long-awaited day has arrived: you’re finally going to get a car. You’re ready to hit the road in your new wheels. But then you remember something that slipped through the cracks in the flurry of test drives, online research, and decisions about paint color, make, and model: you’re going to need car insurance for your new ride. Thing is, you have your heart set on going to the dealership and getting the car this weekend. But the thought of the insurance is still weighing on you.
Well, we’ve got six things you need to know about insurance when you’re buying a car so you’ll be ready to drive away from the dealership with the coverage you need.
What to know about insurance if you’re buying a new car
1. Understand that the dealership will probably want to see proof of insurance before you leave.
Chances are that the dealership will probably want to see proof that you have insurance for your shiny new car before you take possession of the vehicle and drive off the lot. So, if you roll up and walk in expecting to drive away in a new car, you may have another think coming if you can’t prove that you’ve got insurance for it.
2. You need to check if your current policy has a “grace period” where your new car will be covered.
Many people like to buy cars on weekends, which makes adding a car to your policy on the spot difficult if your agent – like lots of people – doesn’t work weekends.
However, some policies have a grace period where a new car will be automatically covered under your current insurance for a certain amount of time. Each policy is different, though, so you should call your agent ahead of purchasing your vehicle to see if this is the case for you. You should also ask how long you have to report the new vehicle and add it to your policy. Some companies give as many as thirty days while others give you less than a week.
Your agent can also help you figure out what to show the dealership to provide proof of insurance so that you can take the car home the day you buy it. Anyways, all of that aside, it’s a good idea to add the new car to your policy ASAP to ensure that it’s properly covered. Yes, you have the grace period, but don’t delay in reporting the new car to your insurer.
3. If you do not already have a car and insurance, you will need to set up a policy before you take your new car home.
If you’re buying your first car or you’re not currently covered under an auto insurance policy, you’ll need to get a policy in place before you take the car home. It’s generally a good idea to try to do some research on rates before you head out to the dealership so you’re prepared for the price.
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Getting insurance online while you’re at the dealership is an option. You may be able to get coverage on the spot. However, it’s important to ensure that you’re getting enough coverage if you buy online. The state minimum levels of insurance may not be enough to fully protect you if you’re involved in a bad accident.
That actually leads us to our next point…
4. Be sure that you’re aware of any requirements for insurance for your new car.
It’s important that you know your state’s minimum levels of insurance so that you’re prepared to get enough liability insurance for your vehicle. But, as we said before, you may want to consider purchasing a higher level of liability coverage to give you additional protection. The goal of having insurance is for it to cover all of the expenses of an accident that you’re legally obligated to pay.
5. Check your financing or lienholder information to see if they require collision and comprehensive coverage.
If you’ve taken out a loan on your car, your lienholder (the entity that you borrowed the money from and thus has a vested interest in the well-being of your vehicle) may require you to purchase collision and comprehensive coverage for your car.
A quick definition:
- Collision coverage will cover the costs to repair or replace your vehicle if you’re in an accident (or if you run into something you’re not supposed to, like a pole or mailbox.)
- Comprehensive coverage will cover the costs to repair or replace your vehicle if it’s damaged by something other than a collision, such as vandalism, fire, or falling objects (like a hostile tree.) It will also cover you against theft.
Liability insurance only covers you for damages that you cause to other people (injury or property destruction.) It won’t cover the costs of repairing or replacing your vehicle if you’re in an accident, so you can see why your lender might require you to carry collision coverage and comprehensive coverage. After all, it’s their money that’s invested in the vehicle.
6. Consider purchasing gap coverage.
Here’s the thing:
Your car’s value depreciates the second you drive it off the dealer’s lot. And as the value of your car goes down, the value of your loan…well, let’s just say that the value of the vehicle can depreciate faster than you can pay off the loan.
Let’s say that you’ve taken out a loan to pay for your car. You have $20,000 left on it. Over time, the value of your vehicle depreciates and it’s only worth $15,000 when you’re in an accident. Insurance will only give you $15,000 for it…but you have $20,000 left on your loan. Uh oh. Where’s the missing $5,000 going to come from when the lender comes looking to get their money back?
Hence the creation of guaranteed asset protection coverage (or gap) coverage. It covers the cost of the difference between the value of your vehicle and the amount left on your loan. So, if you’ve leased a vehicle or taken out a loan, you may want to consider gap insurance.
Car insurance may seem extremely complicated, but it doesn’t have to be. Our agents are experts at making insurance easy. Whether you’re considering buying a new car and need insurance or you’re getting coverage for your current vehicles, we’re here to help you save money on car insurance by getting the best coverage at the best rate. All you have to do to get car insurance quotes is fill out our online form or call us today.