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Car Insurance on a new car

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In most states, car dealerships won’t allow you to drive off the lot before you show proof of car insurance for your new vehicle. And for good reason -- car insurance is required in nearly all states.  Also, no dealer wants to be blamed if you total your new car five miles down the road and wind up making payments on a car you no longer can drive. 

When to get insurance on a new car

If you already have car insurance for your current vehicle, then your existing policy may offer temporary coverage for your new car for a limited time. If you’re not certain if your policy extends coverage, give your agent a quick call to check before picking up your new vehicle.

If your current car insurance policy does automatically extend coverage to a new car, you won’t be required to inform your auto insurance company before buying a car, but don't wait too long after your purchase to notify your insurer.

Policies that extend coverage to new cars typically give you anywhere from seven to 30 days to inform your car insurance company that you purchased a new vehicle.  It's important that you know exactly how long you have and inform your insurer about your new car within this grace period. Otherwise, you could unknowingly end up driving without insurance.

Be sure to find out if your extended coverage includes collision and comprehensive. If it doesn't, your finance or leasing company will require you to add these physical damage coverages to your new car policy immediately.

If you don't have a policy already in place, get car insurance quotes while you're still shopping for a car and make sure you compare insurance rates by car model. You don't want to be in the middle of purchasing your new vehicle and discover you can't afford the insurance on it.

Insurance when buying a new car

Some car insurance policies only cover a new vehicle if it’s replacing a vehicle on your policy and only extend the same coverage. For instance, if you only had liability insurance for your old car, your new car will only have liability coverage. If you find this to be the case, call and add the new car to your policy while at the dealership to have collision and comprehensive coverage in place before you drive off the lot.

Other auto insurance companies’ policy terms automatically provide a new car with comprehensive and collision for only a few days, two to four is common, if all the vehicles on your policy have liability only coverage. 

That limited coverage window allows you to get home and call the insurer, which is especially helpful if you’re buying a car during the weekend and your agent isn’t available for you to add your new vehicle to your policy. 

Other auto policies extend the physical damage coverage for a longer period of time if you have these coverages on at least one of the other cars on your policy.

Rules are all over the place with car insurance companies, and can also vary according to state laws. For instance, in Texas, insurance companies must give a newly obtained vehicle the same amount of coverage as your car with the most coverage.  That means if you have one car with collision and comprehensive and a second car with liability and then you add a third car, it will have collision and comprehensive extended to it.

But, in Texas, if you’re replacing a car on your policy you’re extended only the same coverage as the car the new car is replacing. And any new automatic coverage in Texas only lasts up to 30 days so during that time you must inform your insurer of the new car and decide what exact coverages you want on it.

Whatever your extension period is, if you wait past the deadline to notify your insurance company you will lose coverage on the new vehicle.  This could get you in trouble with your state department of motor vehicles and your finance company, not to mention bring about major financial difficulties if you get in an accident.

Know your auto insurance options

If you're buying your first car, you need to shop around and get a car insurance policy lined up before you buy your new auto. That usually means you’ll need to call from the dealership to formally start the policy by providing the insurer the vehicle identification number.

If you're already insured and the dealer asks to see proof of insurance before you can burn rubber, show your current insurance card if you know there is automatic coverage. The dealer should accept that as proof. If you’re asked to provide something more, most car insurance providers can email or fax proof.  Your car insurance company may have a phone app that will let you show this information, check into that as well.

Keep in mind if you're leasing a vehicle you may need to upgrade your coverage -- leasing companies require you carry higher liability limits of $100,000/$300,000 for bodily injury and $50,000 for property damage. Typically, your insurer can get you the coverage you need within 24 hours.

If it's time to shop for auto insurance, Insure.com provides a list of the best car insurance companies as ranked by policyholders.

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