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Do you need proof of insurance to buy a car?

Keep Proof Of Car Insurance In Your Vehicle

Here's what you need to know...

  • When you own a vehicle, you’re required by law to carry third-party liability insurance to comply with mandatory insurance laws
  • If you’re buying a vehicle through a dealer, you don’t need proof of coverage to test drive the car
  • Once you agree on a sales price and you sign the bill of sale, you’ll take ownership of the vehicle and must insure it
  • If you’re financing the vehicle, the dealer will ask for a proof of coverage before you drive off of the lot
  • When a buyer already owns a vehicle, their existing insurance complete with the broadest coverage will extend to the new car for a limited amount of time
  • How long the coverage extends to a newly acquired vehicle depends on the state and the type of coverage you’re carrying

If you’re on a mission to find the perfect car, it’s important to prepare for your car shopping experience well in advance. You should price interest rates, compare lenders, access vehicle history reports and review safety crash test ratings to ensure that you choose the best loan and the safest car.

You’ll also need to price the cost of insurance on all of the models you’re looking at so that you can keep your insurance expense as low as possible. Even though pricing insurance is important, you won’t actually need to buy coverage until you officially own a car. Compare car insurance rates now by using our FREE tool above!

After the test drive is over and you’re directed to the sales office to start negotiations, you’ll need to show the dealer that you have coverage. While it’s often a requirement with larger insurers, some smaller companies only ask for proof when you’re taking out a loan. Luckily, it’s easy to get insurance when you need it.

Why don’t you need your own insurance to test drive a car?

Experts might recommend that you have coverage whenever you get behind the wheel of a car, but there could be exceptions to the rule if you’re test driving inventory off of a dealer lot. Dealers spend a pretty penny on lot insurance and liability insurance.

The coverage extends to owned vehicles to pay for damages to vehicles sustained while a car is being test driven by customers or maintained by employees.

When you decide that you really like a car, you’ll be asked to provide a copy of your driver license before the agent hands over the keys. Then, the agent will fill out a piece of paper full of legalese that details how you’re covered during a test drive.

When accompanied by a representative of the dealer, the dealer is typically held liable. The only time that you really need to worry about having your own coverage is when your negligent acts are intentional and the injured party comes after the dealer and you as the driver.

What if you’re test driving a private party vehicle?

If you’re thinking about buying a car from a private party, you might be held liable for an accident. Since most injured parties will file suit against the driver first and the owner second, you should have coverage before you can comfortably test drive a car for sale by owner.

If you don’t, let the owner know and have them verify that you would be covered as a permissive user during the test drive.

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When are you legally required to buy auto insurance on a vehicle?

It’s better to be safe than sorry, but you’re not actually legally required to buy auto insurance on a specific car until you own it in the eyes of the state. If you’re going into negotiations, you’re not yet the owner.

It’s not until you agree to a dollar amount, sign the bill of sale, and sign the promissory notice that you’ll be held accountable for purchasing a minimum amount of insurance.

You can’t even register your vehicle in your name unless you have insurance on it.

How much insurance are you required to buy?

Insurance requirements vary by state. You should check to see what the liability requirements are in your state before you buy a car. Some states may also require that you carry Personal Injury Protection, Medical Payments of Uninsured Motorist Protection. If you’re buying the car outright, you only need to prove you have state minimum coverage.

Are you required to buy protection for the car?

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State law doesn’t say that you’re required to carry physical damage coverage to pay for repairs to your car. While it’s not a state requirement, you may be required under contract to buy comprehensive and collision coverage if you’re financing or leasing the car.

If the dealership has connected you with a lender to finalize the sale, it’s the finance agent’s responsibility to get proof that the borrower has full coverage that extends to the new car before they drive away.

Will your existing auto insurance satisfy proof of insurance requirements?

It can be frustrating to approach the end of a deal just to be asked for your proof of insurance. What you might not know is that your existing coverage may satisfy requirements if you have the appropriate type of coverage. Under the Personal Auto Policy provisions, the policy will provide you with coverage for replacement vehicles and for newly acquired vehicles.

You won’t get automatic coverage for the entire term, but the extension will last long enough to give you time to shop around.

The average coverage extension will last for 14 days but some companies are more generous and give you 30 days. You’re expected to add the car within this time to avoid lapses. If you only have liability, the new car will have full coverage for no more than 4 days.

What if you don’t have existing insurance?

If you don’t have existing insurance, you should have a policy quote set up before you even take a trip to the dealership. If you shop around and you get a general idea of how much your insurance will cost, it will be easier once you have a VIN. Then, you can call or complete the application online in the dealer’s office.

What are the consequences of being uninsured?

The penalties for driving without insurance can be steep. Here are some of the consequences:

  • Uninsured loss
  • Citation for being uninsured
  • Court fees and fines
  • Civil litigation
  • Enforcement of lender-placed insurance
  • Requirement to file an SR-22
  • High-risk insurance rates
  • Suspension of your driver license or registration

If you don’t have car insurance or you want to find a better rate for the new car that you’re going to purchase, start shopping now. You can use an online insurance comparison shopping platform and search for car insurance quotes from large insurers instantly.

Once you are able to pinpoint which companies are competitive, decide which company you trust to offer you financial protection each and every time you get behind the wheel. enter your zip code in our FREE tool below to compare car insurance rates now!

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