Do You Need Insurance To Buy A Car?

Introduction to Car Insurance and Vehicle Purchase

Insurance matters when buying a car because it helps cover the cost of damage or theft without you having to spend all the money out of pocket. When you own a vehicle, you're allowed to carry the minimum required coverage in your state.

Each state has its own legal requirements for minimum insurance coverage when you own or operate a vehicle. For most purposes, states typically require at least one form of liability insurance in case you cause an accident. This is typically some combination of injury, property damage, uninsured motorist, or personal injury protection. To see which coverage is required in your state, check with your local Department of Motor Vehicles or Secretary of State office.

Here are the options that are usually presented when you're shopping for minimum car insurance coverage:

• Liability insurance: Liability insurance comes in many forms, including bodily injury liability (BIL), property damage liability (PDL), or personal liability and property damage (PLPD). This type of coverage covers fees for medical expenses and injury to someone else, or damage to someone else's property if caused by you.
• Uninsured or underinsured motorist: This coverage protects you from expenses if you're in an accident with someone who doesn't have enough insurance coverage, or who doesn't have any coverage at all.
• Personal injury protection: This type of coverage provides protection to cover medical expenses for you in the event of an accident, regardless of who is at fault.
• Medical payment coverage: This pays for your passenger's medical expenses if there is an accident, regardless of who is at fault.

However, if you're financing a vehicle, you're required to carry full coverage insurance – full coverage isn't a policy option, but rather a combination of policies. Full coverage differs from minimum insurance requirements because it fully protects the lender's asset, since you're not the owner until the car is paid off.

When you're purchasing a car, you need insurance to drive it off the lot. But, if you have existing coverage on the vehicle you're trading in, you may be eligible for a grace period to allow you to get coverage on the new car. However, this practice varies by state.

Understanding Grace Periods in Insurance Policies

A grace period in car insurance coverage happens when you already have an active insurance policy to which you will be adding the new vehicle. It is typically only available for 7 to 30 days, and only applies if you're adding a car to an existing policy. If you're buying a car for the first time and don't have current coverage, you will need to contact an insurance provider to select a policy before you can take the vehicle.

The good thing about insurance is that if you know which vehicle you're buying, you can have coverage set up ahead of time to begin on your purchase date. Remember, if you're financing a car, you need full coverage insurance, which combines minimum liability requirements with additional coverage.

Transferring Insurance from an Old Car to a New One

When you're getting a new vehicle and need your insurance to transfer from one vehicle to the next, you will need to gather some information, including:

• The Vehicle Identification Number (VIN)
• The year, make, and model of the vehicle
• The current mileage
• Your purchase date
• How the vehicle will be used (personal, business)
• Primary driver information

The next step is to contact your insurance provider or the provider you have chosen to go with. You can do this via phone, online, or in person. If you're visiting them in person, it is better to take care of this before you head to the dealership. You will then choose your coverage, deductible amount, and any add-ons, pay your monthly premium, and then get proof of insurance. Your proof of insurance is often instant if you're filling out the form online.

How to Get New Car Insurance Before Buying a Car

When you're shopping for a new insurance policy, it's important to know where you can get the best rates and coverage, so rate shopping is typically a good way to start. Rate shopping is a way to compare policies and rates before making a commitment to the one that works best for you.

You will need to gather the same information as listed above and go through the same steps, but if you don't have an existing policy or provider, you now have the opportunity to look at the coverage offered by multiple insurance companies to decide what's best for your situation.

Different Types of Coverage Explained

As we mentioned above, when you finance a vehicle, you're required to have full coverage car insurance. "Full coverage" isn't a policy, but rather a combination of policies to fully cover your car. You typically need some form of liability coverage, collision coverage, and comprehensive coverage to count as being "fully" insured.

Here is the explanation of the different types of coverage that combine to make full coverage:

• Liability insurance: Liability insurance comes in many forms, and it covers injuries to yourself and others, as well as property damage from an accident where you were the cause. This is the minimum requirement in most states.
• Collision insurance: This covers damage to your car incurred from an accident. It is required while you're financing a vehicle.
• Comprehensive coverage: This insurance policy covers damage to your vehicle from causes other than accidents, such as falling limbs, animal strikes, fire, theft, and natural disasters. It is typically required when financing a car.

You're required to have auto insurance in most states, but not all states are the same. The only state that doesn't require car insurance coverage is New Hampshire, but if you choose not to get coverage, you have to prove that you have enough money to cover anything that could happen.

Insurance is always in your best interest, not only to protect yourself, but to protect others as well. You can't legally drive a car without insurance in most states, so it pays to be covered, or you could find yourself in hot water if something happens.