Nerdy takeaways
- You need auto insurance to buy a new car.
- If you know the make and model of your future vehicle, you can get insurance before you buy a car.
- You can insure your new car with a policy you already have, but your rates will likely go up.
- Insuring a new car will likely cost more than insuring an older vehicle, so it’s a good idea to factor this extra cost into your budget.
You need insurance if you're going to buy a new car. While it’s technically possible to buy a car without it, you need enough car insurance or proof of financial responsibility to meet your state's minimum coverage requirements.
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When do I need to buy insurance for my new car?
You need to have insurance before you buy a new car, but your exact timing depends on the insurance you already have.
- If you don’t have car insurance, you’ll need to buy a policy before you can drive your new car home. You can get insurance ahead of time as long as you have some specific information, like the VIN (vehicle identification number) of the car you’re going to buy.
- If you do have car insurance, you can show your insurance card to the dealership to prove you have coverage. You need to officially add your new car to your existing policy, but your current coverage will extend temporarily to your new vehicle. Some insurers give you a grace period to let them know about a new vehicle.
You may be able to buy insurance directly from the dealership, but it can be a bad idea. The dealership may try to upsell you on other insurance products, especially from a partnering insurer, and you’d lose the chance to compare car insurance quotes to find your best rate.
If you have an insurance policy you feel confident about, you won’t be persuaded to pay more for extras.
🤓 Nerdy Tip
If you already have car insurance, there’s a good chance your premium will go up when you insure a new vehicle. New cars may have more advanced tech like backup cameras, crash-avoidance sensors and other features, and these features can make them more expensive to repair. Budget for higher insurance rates ahead of time if you’re planning to buy a new car or a second vehicle. How to get auto insurance before buying 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:
- Know the car’s make and model. Take some time to compare cars and identify the vehicle you want.
- Gather information about your chosen vehicle. You’ll need to know your car’s VIN and mileage to buy car insurance for it. If you don’t know these things, you can tell your insurer the make, model and year of the car you plan to buy to get an estimate.
- Compare insurance quotes. It might be tempting to go with the first insurer you come across, but you may find cheaper car insurance if you shop around from a few companies.
- Apply for car insurance. Once you decide which insurer is right for your needs, you can fill out important information about your car and yourself, such as your age, driving record and insurance history. If you don’t know all the details about the car (like the VIN), you’ll be able to get a quote, but you won’t be able to finalize your purchase until you can provide this information.
- Buy your vehicle. Once you have proof of insurance or a carrier willing to cover you, you’re all set to buy your new car.
How do you find a car’s VIN?
It depends on the car and how old it is. But you should be able to find a car’s VIN on the driver’s side door jamb or dashboard. It may also be found under the hood or on the car’s title. Look for a long series of letters and numbers.
How much insurance do I need for a new car?
The amount of auto insurance that you need depends on a variety of factors, such as your car’s age, whether you have a car loan or lease and your state’s legal minimum insurance requirements.
NerdWallet recommends buying more than the minimum amount of insurance that your state requires. Without enough car insurance, a serious crash could leave you responsible for covering potentially thousands of dollars in medical bills and damage.
State minimum car insurance requirements
Your new car insurance policy must meet your state’s minimum car insurance requirements. These requirements vary by state, but they tend to include the following types of coverage:
- Liability insurance pays for injuries or damage you cause to others in a crash, up to your policy’s coverage limits. Every state requires a minimum amount of liability insurance.
- Uninsured and underinsured motorist coverage are required in nearly half of the states. These types of insurance help pay for your medical expenses and property damage if you’re in a crash caused by a driver without any car insurance or without enough coverage to pay your bills.
- Personal Injury Protection (PIP) or no-fault insurance, covers medical costs, lost wages and other expenses for you and your passengers after a crash, regardless of who caused it.
Does every state really require car insurance?
The short answer is yes, but it’s complicated. New Hampshire requires drivers to show proof of financial responsibility after certain driving violations and accidents, or risk a license suspension and massive out-of-pocket costs. You can show proof of financial responsibility with an insurance policy, a surety bond or deposit of cash or securities. The insurance policy is the only realistic option for most people because of the amount of money needed for a bond or deposit.
Full coverage insurance
Your car insurance loan or lease will likely require you to have full coverage car insurance. Full coverage isn't a kind of insurance, but a combination of different coverage types.
Full coverage typically includes your state’s minimum requirements, plus:
- Comprehensive insurance, which covers damage to your car from things like fire, hail, vandalism and theft. Comprehensive insurance pays up to the current market value of your car, minus your insurance policy’s deductible — a set amount subtracted from a claim payout that you agree to pay.
- Collision insurance, which pays for damage to your car caused by you, or from crashes with objects or other vehicles. Collision insurance also pays up to the market value of your car, minus your deductible.
Gap insurance
A car loan or lease typically requires you to have gap insurance, but it’s not required to drive in any state.
If your car is totaled or stolen, gap insurance covers the difference between the remaining balance of your car loan or lease and the car’s current market value. Without gap insurance, you’d be responsible for paying that difference, which could be thousands of dollars if an accident totals your new car.
Here’s how gap insurance works. Let’s say you owe $30,000 on your auto loan, but the market value of your car is $25,000. If you totaled your car and didn’t have gap insurance, your insurance company would only cover up to $25,000 (minus your $500 collision deductible).
In this example, you’d owe your lender the $5,000 difference between your car’s value and your loan’s remaining balance.
| Gap coverage example | ||
|---|---|---|
| Loan left to be paid | $30,000. | |
| Current value of car | $25,000. | |
| Collision insurance deductible | $500. | |
| Collision insurance pays your lender | $24,500. | |
| Amount still due on loan after insurance claim payout | $5,500. | |
| With gap coverage, driver only pays deductible | $500. | |
| Without gap coverage, driver pays deductible and pays off auto loan | $5,500. | |
New car replacement coverage
If a crash totals your new car, or if it's stolen, new car replacement insurance will pay to replace it with a vehicle of the same make, model and value.
New car replacement covers the entire cost of replacing your vehicle with a new car of the same make and model, minus your deductible. Comprehensive and collision insurance will pay up to the actual cash value of your vehicle, minus the deductible, but you’ll have to get a new vehicle on your own.
See what you could save on car insurance
Easily compare personalized rates to see how much switching car insurance could save you.
How can I save on new car insurance?
Comparing quotes from multiple insurance companies is a great way to stay under budget and get the best deal on insurance for your new car. It’s also a good idea to shop around once a year and switch insurers if you find a cheaper option that still meets your coverage needs.
» MORE: Average cost of car insurance
Here are some ways you can lower your auto insurance rates:
- Increase your deductible. Raising your deductible will lower your rate, but a deductible that’s too high would limit the claims that you could make. That’s because your car insurance won’t pay for damage that costs less to repair than your deductible.
- Bundle policies. You might save by combining or bundling your auto insurance with another policy from the same company, such as bundling home and auto insurance together.
- Ask about discounts. Insurers may offer discounts on auto insurance for things like having protective equipment in your car (like air bags or an alarm system), driving safely and opting to pay for your insurance electronically.
- Consider usage-based insurance. When you sign up for usage-based insurance, you agree to share details about your driving behavior with your insurance company. If you drive well, you might qualify for lower rates, but it’s not guaranteed.
Buying a new car can be expensive, but it’s better to hunt for discounts and use other cost-saving methods than to compromise on coverage you need and risk being underinsured.
Methodology
NerdWallet found median insurance estimates based on data collected about the largest insurers in all 50 states and Washington, D.C. Rates were for 35-year-old male and female drivers with good credit, no tickets or violations, and with the following coverage limits:
- $100,000 bodily injury liability coverage per person.
- $300,000 bodily injury liability coverage per crash.
- $100,000 property damage liability coverage per crash.
- $100,000 uninsured motorist bodily injury coverage per person.
- $300,000 uninsured motorist bodily injury coverage per crash.
- Collision coverage with $1,000 deductible.
- Comprehensive coverage with $1,000 deductible.
In states where required, minimum additional coverages were added. Some policies include additional coverages at the insurer’s discretion. These are sample rates generated through Quadrant Information Services. Your own rates will be different.
Vehicles listed were among the top-selling models in the U.S. in 2023, according to data collected by Kelley Blue Book. Starting MSRP and insurance rates are for 2024 models.
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