Car insurance for new cars

When you buy a new car, you have to make sure you have insurance before you drive it out of the lot. And if you’re purchasing a new car, as opposed to a used one, there are some extra insurance needs you should consider.

Zack SigelAnna Swartz 1600

Zack Sigel & Anna Swartz

Published December 12, 2019

KEY TAKEAWAYS

  • Buying car insurance for a new car is pretty much the same as buying for a used or older car, but you may want to consider extra coverage to protect your big investment

  • New car replacement is a policy add-on that pays you enough to replace your car with a comparable one if it's totaled in the first year of ownership

  • You can add your new car to an existing car insurance policy, or, if you don't already have insurance, you can buy a policy to start the day you take home your new car

Buying a new car can be exciting — you get to take home a shiny new vehicle with that fresh new car smell and all the latest features. But there are also a lot of logistics to consider, like what kind of car insurance coverage you need for your new ride. Are you leasing or buying a car with a car loan? Then your lienholder or lessor may require you to get certain coverage.

Do you want to spring for extra coverage in case you total your new car in the first year or so of ownership? And how exactly do you add your new car to your current car insurance policy? Or, to get even more complicated, how do you buy car insurance before you know which specific new car you’re buying?

Thankfully, all these questions have answers. Buying and insuring your new car is a similar process to buying car insurance for any other vehicle. There are just a few extra factors to consider when the car is new.

In this article:

New car insurance

Before you figure out what type of coverage you need for your new car, it’s important to understand the basic components of a policy. Car insurance is comprised of different coverages that offer you different types of protection.

Coverage TypeWhat It Does
Bodily injury liabilityThe part of your liability coverage that pays for medical bills if you've injured someone in an accident
Property damage liabilityThe other part of liability coverage, covers the cost of property damage you've caused in an accident
Personal injury protectionCovers medical expenses for you or your passengers after an accident
Uninsured/underinsured motoristCovers the costs if you're in an accident caused by a driver with little or no car insurance
ComprehensiveCovers damage to your car that happens when you're not driving
CollisionCovers damage to your car after a car accident, no matter who was at fault

Those basic coverages make up what’s usually referred to as full coverage car insurance. With a new car, because it’s a significant investment, it’s a good idea to invest in comprehensive and collision coverage, which pay for damage to the car itself. If you lease or buy your car with a loan, you may be required to include those coverages in your policy.

You may also be required to include gap insurance in your policy, and here’s why: If your car is totaled or stolen, your car insurance company will pay out the ACV, or actual cash value of your vehicle.

But the ACV may not be enough for you to pay off the remaining balance on your loan or lease, meaning you could be stuck making payments on a car you don’t have any longer. Gap insurance pays off the remaining balance on your loan or lease, meaning you’re off the hook.

Owners of a brand new car might also want to consider adding new car replacement coverage to their policy.

This is a special kind of coverage add-on that’s usually only available if you’re the original owner of a car that’s less than a year or so old. New car replacement coverage guarantees that, if your new car is totaled, you’ll be paid out enough to replace your totaled car with a comparable one.

Is a new car more expensive to insure?

Your car insurance premiums are calculated based on a number of factors, including your driving history, age, ZIP code, credit score, and coverage amounts. The make, model and year of your car are just one factor that goes into determining your insurance rates.

However, a new car can be more expensive to insure than an older one simply because it’s more valuable. It may also have high-tech features that older cars don’t.

While some safety features and newer technology can lower your car insurance costs slightly by decreasing your odds of getting into a car accident, some tech features may actually raise your rates by making parts more expensive to fix or replace.

The cost of insuring a new car also depends on the coverage you choose. Some coverages are more expensive than others — for example, new car replacement coverage can cost around $120 extra per year to add to your policy.

Learn more about the cost of car insurance

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Adding a new car to your existing car insurance policy

If you already have car insurance, you can easily add your new car to the policy. Adding the new car to your existing policy may increase your premiums, but unless you live in one of the two states that doesn’t require car insurance, then you have no choice but to do so.

But if you’re headed to the dealership and have no idea what kind of car you want, you can still drive away with a new car car even if you haven’t yet added it to your auto insurance policy.

That’s because many car insurance policies have a provision for new car insurance that grants you a grace period between the time you buy the car and the time you add the new car to your policy. Instead, during that time, whatever coverage you have for your other car automatically applies to your new car. If you have multiple cars, the strongest coverage may apply.

Depending on your insurer, as well as state and local laws, that grace period may be as little as 24 hours and as long as one month, but make sure to consult your car insurance policy or speak with your insurer’s representative to confirm. If your auto insurance policy doesn’t have this provision for new cars, you won’t be able to drive the new car off the lot.

You may have to modify your coverage if your current car insurance policy doesn’t include coverage in all the components. For one, if you leased your new car or paid for it with a loan, the leaseholder or lienholder will require you to purchase comprehensive and collision insurance to protect their asset. In some cases, you’ll be required to purchase gap insurance as well.

Although you’ll likely see a premium hike when adding the new car to your existing policy, if it’s a second car, you’ll qualify for a multiple-vehicle discount provided your insurance company offers one. Additionally, adding a new car is a great opportunity to review the coverage you already have. For example, you may qualify for a better rate if your credit score has gone up.

Learn more about adding a car to your car insurance policy

Do I need insurance before buying a car?

If you don’t have any car insurance going into the car dealership, you won’t be able to leave with a car. You should still be allowed to test drive cars, as many dealers have “garage liability” insurance to protect the cars they sell from precisely this scenario.

But you’ll need to shop around for car insurance and purchase a policy before you show up at the dealership. If you know what specific car you’re buying, you can ask the dealer for the car’s VIN, or vehicle identification number, which you’ll need to enter when you buy the policy. Then, all you need to do is set the start date of your new policy so it lines up with the day you’re picking up your new car.

You’ll also have to bring proof of insurance to the dealership, or have your new insurance company fax or email proof so you can drive your car home. If you don’t know the specific car you’re getting but you know the make and model, you can still shop around for insurance and choose a policy.

Give all the necessary info except the VIN, and then when you go to buy the car, call or contact your insurer that day and finish purchasing the policy. That way you’ll be able to get insurance and get your car all at once.

Learn more about how to buy car insurance before you buy a car