Car Insurance for a New Car: What You Need To Know Before You Drive Off the Lot
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Buying a new car is exciting, but it's also a significant investment that you must protect. Getting the right car insurance for a new car isn't just critical to protect your investment; it may also be a legal requirement.
Whether you've owned cars in the past, you're a first-time car owner, or you're dissatisfied with your current policy, it's vital to know what type of insurance and how much coverage you need. Choosing the right policy will ensure you meet both legal and lender requirements — and could save you a lot of money in the event of an accident.
How does car insurance work? We answer that and a whole lot more here.
The Importance of Car Insurance for New Car Purchasers
Car insurance for new cars may not simply be important — it's often mandatory. Having car insurance is required by law in most states, as well as by most lenders and leasing agents.
Since lenders or leasing agents are the lienholders of your vehicle until you've paid it off, they must make sure the car is being taken care of. As such, they often require you to purchase collision coverage and/or comprehensive coverage to repair or replace the vehicle if it's damaged in a covered loss. While new car replacement insurance probably isn't something you're thinking about right after buying a cool new car, it's typically essential for leases or financed purchases.
Even if you bought the car with cash, insurance for new car purchases will likely save you money in the long run. If you're in an accident or your car is dinged up in a parking lot, insurance coverage could pay for the repairs rather than you having to do so out of pocket. If you're ever at fault for an accident, liability coverage can help pay for costs like legal fees, an injured party's medical expenses, and vehicle damage.
Legal Requirements for Car Insurance
Why is car insurance legally required in most states? Because it protects everyone. When you're at fault for an accident, auto liability coverage helps pay for the covered losses we detailed above. Otherwise, you'd be responsible out of pocket.
State Insurance Mandates
48 out of 50 states have car insurance mandates. The only states that don't are New Hampshire and Virginia. However, both still have legal requirements. In New Hampshire, you must demonstrate that you can afford to cover New Hampshire’s Motor Vehicle Financial Responsibility Requirements, which total $100,000. In Virginia, you must pay a $500 Uninsured Motor Vehicle fee.
Review the insurance requirements of your state:
Securing Insurance Before Purchase
As we've noted, nearly all lenders and leasing agents require borrowers to have car insurance for new cars. Your lender or leasing agent won't secure car insurance for you, so it's essential that you figure out your coverage needs before you go to purchase a car.
Proof of Insurance Considerations
Proof of insurance is a crucial document for all drivers that demonstrates a driver's compliance with the state's legal regulations and financial responsibility associated with driving a car. You often need proof of coverage during traffic stops or an accident, so getting this document from your insurance provider is essential.
Most companies mail you proof of insurance after approval, or you can download and print a copy at home. Either way, it should live in your glove compartment.
Making Informed Decisions on Coverage Levels
When shopping for car insurance for new cars, there's a lot to consider. With so many providers on the market, getting a quote for new car insurance can be overwhelming. Moreover, state-regulated minimums are usually far too low to cover vehicle repair or replacement costs.
That said, there are a few key factors to bear in mind to help you make an informed decision:
- State regulations: Each state has different minimum coverage requirements. These minimums cover liability car insurance, uninsured motorist coverage, and personal injury protection (PIP).
- Lender minimums: Meeting the state minimum coverage is easy, but before you make a car purchase, you should contact your lender to understand their new car insurance minimums.
- Optional coverages: Collision and comprehensive coverages aren't required, but they cover you in the event of an accident. If you're leasing or financing a purchase, consider gap insurance, which pays off an auto loan if your car is stolen. Remember, if you want to cut down on monthly premiums, choose a higher deductible you're willing to pay out of pocket after a covered event.
- Vehicle make and model: Insurance is generally more expensive for luxury cars and electric vehicles because they are more expensive to maintain and require higher coverage limits.
Tips for New Car Owners on Insurance
Whether you're a new driver or a first-time car owner, it's essential to shop for quotes for new car insurance before committing to an insurance company. Use tools like EverQuote to find the right insurer for your vehicle and needs. Make sure you have information like the vehicle identification number (VIN).
Having a safe driving record will help you get the best premiums possible, but in some states, you can also do things like take safe driving courses to cut down on premium costs.
New drivers who are a little tentative should opt for collision, comprehensive, gap, and maybe even medical payment coverage to offset the financial impact of a serious accident. Remember, you can always cancel or switch car insurance, so don't feel like this is a permanent decision.
Conclusion: Protecting Your Investment With Proper Insurance
Getting a new car is a lot of fun — but it also comes with a lot of responsibility. Not only do you have a legal obligation to get car insurance for a new car, but you owe it to yourself to protect your investment properly. Make sure you have the right coverage for your vehicle by spending the time to shop and compare quotes between the many providers on the market.
Fortunately, it's easier than ever to compare coverages and providers. Whether you're a brand new driver, it's your first time owning a car, or you're interested in switching your current auto insurance policy, you can easily shop providers to find your best options with EverQuote.