Financing a vehicle requires full coverage auto insurance. If you already have an existing insurance policy, and you want to transfer it to your next financed car, it’s usually not an issue. Here’s what you need to know.
Transferring Auto Insurance
If you want to keep your existing insurance company and you’re looking to transfer the policy to another vehicle, then give your agent a call. It’s usually pretty easy to transfer your existing policy to another vehicle. Many insurance companies are able to give you quotes for policies over the phone, provided you have information such as:
- Make, model, and year of your next car
- Your ZIP code
- Who the primary driver is
- Vehicle identification number (VIN)
- A list of its safety features
- If it has a clean title
The insurance company usually asks you when you’d like to officially transfer the policy, and then lets you know if your premium increases or decreases.
When insuring a car, the cost varies depending on its condition, make, year, and features. Newer cars tend to be a little more expensive to insure than used ones, so if you’re upgrading to a newer ride, then you may need to anticipate a higher premium when you transfer the coverage.
Do I Need Auto Insurance?
If you want to drive your vehicle legally and you’re financing, you need to meet your lender’s insurance requirements as well as your state’s requirements. Most states require some form of auto insurance to have a car on the road. And in nearly every case, your auto lender requires you to carry full coverage. This is usually a combination of liability, comprehensive, and collision coverage.
If you just have basic personal liability and property damage (PLPD) coverage you’re likely to pay more for full coverage when you finance your next car. Lenders require the most coverage available since the vehicle is their property until you complete the loan. Once you pay off your loan, you can downgrade to your state's minimum coverage if you’d prefer.
Optional Insurance Coverages
While full coverage is required, there are other optional insurance coverages that may be worth considering.
If you’re financing a brand new vehicle, it’s a good idea to at least consider GAP insurance. GAP stands for Guaranteed Asset Protection. It’s useful because it covers the balance of your loan if something happens and your vehicle is deemed a total loss. Full coverage auto insurance only covers the value of your car at the time of an incident – not your loan balance. But if you have GAP insurance and something happens, the GAP insurance pays out the loan balance if you owe more on the car than what it’s worth.
Some other optional insurance coverages your insurance company may offer include:
- Glass coverage
- Uninsured and underinsured motorist coverage
- Medical payments coverage
- Personal injury protection
- Classic car insurance
Some of these optional coverages are only available in some states, but they may be worth considering. Just know that some of these coverage options require deductibles, and they're likely to raise your total cost.
Shopping With a Dealership
Some dealerships are signed up with auto lenders and insurance companies. While you’re shopping for a vehicle with a dealer, they may tell you about their lending partners and what insurance companies they’re affiliated with.
For some borrowers, it can be very convenient to finance a car through the dealership and purchase insurance at the same time. If you’re unhappy with your current insurance company and want to do some rate shopping, try asking the dealership about their insurance options.
Additionally, if your credit isn’t great and you find a special finance dealership, they may be signed up with subprime auto lenders that assist borrowers with credit challenges. Not every dealership is equipped to assist bad credit borrowers, but if you’re struggling to find a lender for your next car, put your feelers out for a special finance dealership that may be able to help.
Here at Auto Credit Express, we want to help, too. We’ve created a nationwide network of dealers that are signed up with subprime lenders. If you want to skip the search for a dealership that’s ready to assist borrowers with less than perfect credit, then complete our free auto loan request form. We’ll look for a dealer in your local area at no cost and with no obligation.