New Car Insurance Grace Period Explained: Here’s What You Need To Know
When you buy a new car, you need to get an auto insurance policy in place before you can drive the car off the dealership floor. Similarly, if you are buying a car from a private seller, you will need to have proof of insurance before you can drive away.
While it is illegal to drive without insurance coverage, some insurance companies offer you a grace period of between seven to thirty days, during which you will need to add the vehicle to your car insurance policy.
If you don’t activate your car insurance during this grace period, you will be penalized for driving uninsured.
In this article, we explore this grace period and what it means for you, as well as provide you with tips on how to get the cheapest auto insurance for your new ride.
What Is a Car Insurance Coverage Grace Period?
A grace period from your insurance provider is a set number of days (usually between seven and thirty days) during which you can add your new vehicle to your car insurance policy.
It is important to know that a grace period on your car insurance coverage only applies to you if you already have an active auto insurance policy in place. This could be for another vehicle or coverage that you have paid for up front.
Not every car insurance company will offer you a grace period. Before you take ownership of your new car, be sure to contact your insurer to see whether they offer a grace period, and check how long you have to add your vehicle to your insurance policy.
Do First-Time Car Buyers, or Drivers without Car Insurance Get a Grace Period?
It is not possible to drive off with your new car without first providing proof of insurance.
If you are buying your first car and do not have an existing car insurance policy, then you will need to have insurance coverage in place.
Getting insurance coverage, including your proof of insurance, does not take long. Typically, you can get insured in under an hour.
Same-day insurance is fairly common, since underwriters are able to put car insurance policies together quickly. You could even get your insurance coverage arranged while you are at the dealership or when buying your car from a private seller.
Many insurance companies simply require you to put down a deposit for them to start your insurance coverage.
What Do You Need to Get Car Insurance?
Getting new car insurance is quick and easy. All that you need to do is provide your insurance company with the following details so that they can issue your proof of insurance:
- Year, make, model, and VIN (vehicle identification number).
- Address where vehicle is parked.
- Name of registered owner.
- Date of purchase.
- Prior insurance carrier and policy expiration date.
What Type of Insurance Should You Buy?
Whether you buy a new vehicle or want to buy a used car from a private seller, you will need to carry car insurance before you can drive off with the vehicle.
There are various types of auto insurance that you can buy, and what you select will depend on your budget and needs.
In most states, you will be required to carry liability insurance in order to drive. Liability coverage is also often referred to as minimum liability coverage.
This coverage includes two types of insurance—property damage liability coverage and bodily injury liability coverage.
Bodily injury liability coverage
If you are responsible for a car accident, bodily injury liability insurance (BI) pays for the medical costs of the people that are injured (excluding yourself).
This coverage will also help cover payment for legal defense in the event that you are sued for any damages.
Property damage liability coverage
Property damage liability coverage (PD) helps to pay for the the cost of repairs if you are at fault in an accident that damages another vehicle.
It will also cover you if you damage property such as a fence or building.
This coverage protects you financially if your car is damaged by anything that is not an actual collision. For example, comprehensive coverage will pay for the repairs from damage related to:
- Weather events (hail, wind, floods, lightning, earthquakes, etc.).
- Fire and explosions.
- Windshield and glass damage.
- Falling objects (trees, rocks, debris, etc.).
- Damage caused by rodents.
- Car accidents with animals.
If you are involved in an accident, collision coverage will pay for the repairs to your vehicle. This could include driving into a traffic light, hitting a fence, or being rear-ended by another car.
Collision coverage also protects you if your car is damaged while stationary—such as being hit by another car while you are parked.
Apart from liability coverage, comprehensive coverage, and collision coverage, your insurance company may also offer you additional insurance coverage which is entirely optional:
Personal injury protection (PIP)
This insurance covers the cost of your and your passengers’ injuries after an accident, as well as any long-term impact an accident may have on your lives, such as lost wages.
Uninsured and underinsured motorist coverage
If you are involved in an accident with someone who does not have car insurance (uninsured), or does not have sufficient insurance (underinsured), this coverage pays for the repairs to your vehicle.
Medical payments coverage
This coverage pays for your medical expenses after an accident, but not funeral costs or any other additional expenses.
What Are the Auto Insurance Requirements for a Brand-New Car?
Your insurance options will depend on whether you are financing or leasing your new car.
If you are financing your vehicle, your lender will require you to have comprehensive coverage, as well as collision coverage. This will be in addition to the liability coverage that you will need to have in place by law.
The reason for this is that your lender will want to protect their asset. Your car will remain their asset until such time as you have paid for it in full.
By having comprehensive and collision coverage in place, they can ensure that any damages to the vehicle can be paid for.
You will typically be required to have comprehensive and collision coverage in place if you are leasing a car.
You may also not be allowed by your leasing company to choose a deductible over $1,000.
In addition, you will typically be required to have higher liability coverage limits than those that your state expects. On leased vehicles, you generally need coverage of around $100,000 per person and $300,000 per accident.
Key Point: What Is a Deductible?
A deductible is the amount of money you need to pay out of your own pocket toward a covered claim.
For example, if you have been involved in an accident and the damages will cost around $5,000 to repair, your insurance company will only contribute $4,500 to the repairs if your deductible is $500.
If you have bought your car outright, the only coverage that you will need is the minimum amount of liability insurance required by your state.
To make sure that you are protected financially from any accident, whether you are at fault or another driver is, you can choose to add comprehensive and collision coverage to your auto insurance policy.
How do you switch your existing policy to a new car?
You will not need to transfer your insurance to a new car immediately. Because most insurers offer a grace period for updating your insurance policy, you will be able to add the new car within the seven to thirty-day period.
You can also keep your old car on your insurance policy and simply add coverage for the new car, if you are keeping your existing vehicle.
What Happens If You Are Involved in a Car Accident during Your Grace Period?
If you are involved in an accident, as long as it happens during your grace period, you should be covered based on the existing auto insurance coverage limits that you have in place.
In other words, if you have collision and comprehensive coverage in place, this would extend to your new vehicle.
If you need to file a claim, you can expect that your insurance rates may increase. In the event that your auto insurance rates do increase, it may be time to shop around for cheaper insurance rates.
To start this process, you can simply head to the top of this page and enter your zip code. We will ask for a few details, after which you will be given a wide range of cheap insurance quotes that you can choose from.
What Happens If You Have a Lapse in Your Auto Insurance Coverage?
It is absolutely essential that you do not allow your insurance coverage to lapse after you buy a car. A coverage lapse would mean that you would be driving uninsured, which is illegal.
In addition, you will not be covered if you happen to be involved in an accident. This means that you will be personally liable for any damages that you suffer or cause.
Lastly, if you do allow your auto insurance to lapse, once you reinstate it, you will most probably pay higher insurance rates. Because you did not have insurance in place, you will be seen as a high-risk customer.
To be on the safe side, it is best to start searching for auto insurance quotes as soon as possible after buying a car.
Get Cheap Car Insurance Today with CheapInsurance.com
If you are looking to buy a new car, you can rest assured that you will have time to get car insurance coverage after you have taken ownership of the vehicle. However, it is important to remember that this only applies if you have existing coverage.
If you don’t have auto insurance yet, you can start a car insurance policy before taking ownership of your new car, as long as you have the vehicle identification number.
Your first step is to ensure that you have insurance coverage in place so that you can legally drive and so that you are covered if anything were to happen while you are parked or driving.
Finding cheap car insurance is essential. Why pay more for the same coverage if you don’t need to?
Not all auto insurance policies are created equal and finding a good policy at a fair price can be a time-consuming process.
Fortunately, we are here to help you find the insurance coverage that you need—at the best possible price.
All you need to do is head to the top of this page and enter your zip code. You will find a wide selection of insurance quotes to choose from.
Once you have an idea of the auto insurance premiums that you could be paying, it will be time for you to contact the insurers that are offering you the cheapest rates to get a formal quote.
Getting car insurance should be quick, simple, and stress-free, and you deserve to get the best insurance rates possible.
At CheapInsurance.com, we’ve got you covered!