Buying New Car Insurance: Everything You Need to Know


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ByMark Fitzpatrick
Edited byRae Osborn
ByMark Fitzpatrick
Edited byRae Osborn

Updated: May 20, 2024

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When buying a new car, getting insurance should be one of the first things you think about. You can buy the car, but you can't drive it off the lot without proof of insurance. Whether you're updating an existing policy or buying a completely new one, your coverage needs will change. Factors such as the value, make, and model of your new vehicle will influence the cost of your premiums. Shop around to find the car insurance provider with coverage that meets your new needs for the right price.

Key Takeaways

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Insurance is a legal requirement, whether you own or are financing your car. Financed cars often have higher insurance requirements set by lenders, including additional coverages like collision and comprehensive insurance.

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The best time to buy new car insurance is before you buy your car. While you can purchase a car without proof of insurance, you can only legally drive it off the lot once you have active coverage in place.

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For a Toyota Camry, the average cost of a new car insurance policy is $1,569 for full coverage, providing comprehensive protection, and $617 for state minimum coverage, meeting the basic legal requirements.

Why Trust MoneyGeek? We ensure that MoneyGeek's content meets our highest editorial standards by carefully scrutinizing it. Throughout each stage, our team writes, checks facts, edits and reviews the content produced to generate accurate information.

How to Get Insurance on a New Car

You have a few options to get coverage for your new car. You can add the car to your current insurance policy, transfer your existing insurance to the new car, or buy a completely new policy. When it comes to getting insurance for a new car, the process varies depending on whether you have an existing policy or not.

If you already have a policy, you can simply update it to include your new car or transfer your insurance to your new car without canceling the current one. If you don't have an existing policy, estimate the coverage you need for your budget, legal requirements, and vehicle value, choose the right insurance company and obtain quotes from multiple insurers.

Getting Your New Car Insurance if You Have an Existing Policy

If you have a current car insurance policy, there are two ways you can quickly get coverage for your new car. You can add a new vehicle to your insurance policy or you can transfer your insurance to your new car

In either case, you don’t need to cancel your current policy and can be done with just a phone call or a few clicks on the customer portal. At any time during your contract, you can update your policy — remove or add coverage based on your new needs.

Getting Your New Car Insurance if You Don’t Have an Existing Policy

When seeking insurance for a new car, consider your budget, the vehicle's value, and the state's legal requirements. If you aim to find the cheapest car insurance, utilizing online calculators and shopping around from at least three different insurance providers can help you find the best deal. Balancing affordability with the necessary coverage, whether it's the legally mandated minimum or more comprehensive protection, ensures that you select the policy that aligns with your specific needs and financial situation.

1
Estimate how much coverage you need

The first thing you need to consider when buying insurance for a new car is your budget and the legal requirements in your state.

Most states mandate a minimum amount of liability insurance, so you'll need to start there. If your car is new and more expensive to repair, you may want to consider additional coverage like collision or comprehensive insurance.

If you're financing your car, your lien holder will likely require you to get full coverage car insurance, which includes collision and comprehensive insurance. It's essential to strike the right balance; if your premiums are worth more than the value of your car, you're paying too much insurance. Assessing your vehicle's make, model, and value, and your driving habits and financial situation, will help you determine the level of coverage that suits you best.

2
Decide what to look for in a car insurance company

When choosing insurance for your new car, weighing the benefits between getting affordable insurance and getting an all-inclusive policy is essential.

By choosing a more economical option, you can save on your monthly expenses. Affordable insurance can still meet the basic coverage requirements mandated by your state, ensuring legal compliance without overextending your budget.

Insuring your car with the best company can provide more exhaustive coverage. This can help pay for repairs, offer reimbursement for rental cars, and even assist in paying for a car replacement if necessary. While this option may come at a higher cost, its comprehensive protection and peace of mind can be well worth the investment.

By carefully considering these factors, you can find an insurance provider that aligns with your financial situation and coverage needs, whether you prioritize affordability or comprehensive protection.

3
Gather insurance requirements

Before requesting quotes for your new car insurance, it's essential to have all the necessary information and documents ready. Car insurance companies typically ask for the following:

  • Vehicle Information:
  1. Vehicle Identification Number (VIN)
  2. Make, model and year
  3. Purchase price
  4. Odometer reading
  • Personal Information:
  1. Driver's license number
  2. Social Security number (optional in some cases)
  3. Driving record
  4. Credit score (if applicable)
  • Insurance History:
  1. Previous insurance policy details
  2. Any recent claims or accidents
  • Financing Information (if applicable):
  1. Lienholder's name and address
  2. Lease or finance agreement

Having these documents and details readily available will streamline the process of obtaining quotes and ensure that you receive accurate and tailored coverage options for your new car.

4
Get quotes from at least three insurers

Request quotes from at least three different companies to get the best deal. This is especially important if you are a new driver. Using the list of coverage needs and budget considerations you put together in Step 1, submit the same coverages to all insurance companies. This ensures that you are evaluating the options based on the same criteria, making it easier for you to decide.

5
Purchase coverage

Once you've analyzed your options, choose the policy that best fits your needs and budget. Complete the paperwork, provide any required documentation and make the initial payment to activate your coverage.

6
Review and store documents

After finalizing your policy, review all the details to ensure they are correct and understand your coverage. Store your insurance card and policy documents in a safe place, such as your glove compartment, so they are easily accessible.

Whether updating a current policy or buying a policy for a new car, your coverage needs will likely change. You'll need to go through the process as if you're getting a completely new policy. Review your current policy and decide if the same coverages apply. Shop around and decide if you’re better off switching car insurance companies.

The cost of your premiums depends on the value, make, and model of your car. If you get a new vehicle, the premium will be different from insuring your old car. Doing your research will help you get the best car insurance that meets your needs.

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HOW TO GET PROOF OF INSURANCE FOR A NEW CAR

Your insurance provider will usually send you proof of insurance automatically, either electronically or by mail. You may be able to download proof of insurance directly from your insurer's website. Whether in physical or digital form, proof of insurance verifies that you have the necessary coverage to drive legally. Always ensure that you have proof of insurance whenever you're driving.

Proof of insurance can come in the form of a:

  • Insurance ID card
  • Digital insurance card
  • Insurance binder
  • Declaration page
  • SR-22 certificate

How Much Is New Car Insurance?

Examining the table below, the average cost of a new car insurance policy for a Toyota Camry is $1,569 for full coverage and $617 for state minimum coverage. These figures give you an idea of what you can expect to pay, allowing you to make an informed decision that suits your needs and budget.

Average Cost of New Car Insurance
Data filtered by:Results filtered by:
Coverage:
Coverage:Full Coverage
2012Annual Premium$1,299
2022Annual Premium$1,569

The driver's age and gender, driving history, location of residence, and the make and model of the new car influence the cost of car insurance. Credit score, annual mileage driven, previous insurance history, discount eligibility, and the chosen deductible amount further contribute to the premium.

  • Driver's Age and Gender: Younger drivers, especially males, are often considered higher risk, leading to higher premiums.
  • Driving Record: A history of accidents, traffic violations, or DUIs can increase the cost of insurance.
  • Location: Where you live, and drive can impact costs, with urban areas having higher rates due to increased risk of accidents and theft.
  • Vehicle Type: The make, model, and age of the car influence repair costs, safety ratings, and theft likelihood, all of which affect premiums.
  • Credit Score: In some states, insurers may use your credit score to predict the likelihood of filing a claim, affecting your premium.
  • Annual Mileage: The more you drive, the higher the risk of an accident, which can lead to higher premiums.
  • Insurance History: Previous claims or lapses in coverage can lead to higher premiums.
  • Discount Eligibility: Qualifying for discounts, such as multi-car, safe driver, or good student discounts, can reduce the cost.
  • Deductible Amount: Choosing a higher deductible (the amount you pay before insurance kicks in) can lower your premium.

Each car insurance provider uses its own unique combination of factors to determine car insurance premiums for individual policyholders. While age, driving record, and vehicle type are commonly considered, the weight given to each may vary among providers. This approach allows insurers to assess risk and tailor coverage to meet each specific driver.

When to Get Insurance for a New Car

It is best to get insurance before finalizing the purchase of a new car since most dealerships require proof of insurance to drive the car off the lot. This way you have coverage from the moment you become the owner. You should start shopping for insurance quotes once you have narrowed down your vehicle choices, allowing time to compare options and select the best coverage.

Besides buying insurance for your new car, there are other money-smart reasons to shop around for coverage. Exploring your options can lead to significant savings, whether you're switching companies, moving to a different state, or benefiting from an improved credit or driving record.

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DO YOU NEED INSURANCE RIGHT AWAY AFTER BUYING A CAR?

A grace period is a specific time frame during which your existing car insurance policy may extend coverage to your new car. This allows for temporary coverage of the new car, typically ranging from a few days to a month, depending on the insurer and the policy.

You need to buy insurance before you bring your new car home. Driving without insurance is illegal and exposes you to significant financial risk. If you have an existing policy, you may not need to buy insurance for the new car right away, thanks to the new car grace period.

Do You Need Insurance to Buy a Car?

You don't need insurance to buy a car, but dealerships require you to show proof of insurance before you drive off the lot. So, it's wise to have an existing policy or to arrange new insurance before buying your new car.

When You Buy a New Car, Is It Insured?

When you buy a new car, it doesn't automatically come with car insurance. You need to insure your car yourself. Car dealerships may offer you insurance, but this may not provide you with the best rates and coverage. You should shop around. By comparing quotes and understanding your specific requirements, you can select a policy that offers the protection you need at a price that fits your budget.

Do You Have to Get Insurance?

Yes, you have to get car insurance. It's a legal requirement in all states except New Hampshire and Virginia. Each state has its own set of minimum car insurance requirements, with varying policy limits and coverage types.The type of coverage you need will depend on whether you own your car outright or if you’re financing it:

  • Owned cars need to have state minimum liability car insurance requirements.
  • Financed cars need to have full coverage insurance, which usually includes liability, collision, and comprehensive insurance.
Coverage Type
What It Covers
Is it Required?

Liability-Only Insurance

Damages to others if you're at fault (includes bodily injury and property damage)

Yes

Personal Injury Protection (PIP)

Medical expenses for you and your passengers, regardless of fault

Required in:

  • Arkansas
  • Delaware
  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Oregon
  • Pennsylvania
  • Texas
  • Utah

Uninsured/Underinsured Motorist

Damages caused by a driver without insurance or with insufficient coverage

Required in:

  • Kentucky
  • Maine
  • Maryland
  • Minnesota
  • Missouri
  • Nebraska
  • New Jersey
  • New York
  • North Carolina
  • North Dakota
  • Oregon
  • South Carolina
  • South Dakota
  • West Virginia
  • Wisconsin

Collision Insurance

Damages to your car from a collision with another vehicle or object

Often required by lenders

Comprehensive Insurance

Non-collision damages (e.g., theft, vandalism, weather damage)

Often required by lenders

While not typically required by law, gap insurance may be mandated or recommended by lenders if you're financing your vehicle. This is important if you have a long-term loan or made a down payment. It ensures that if your car is totaled, you're not left owing more on the loan than the car's current value. You need to have car insurance whether you own your car or are financing it. You could face fines, lose your license, or face legal problems if you don't have insurance.

Below, you'll find a comparison of insurance rates between a 2012 Toyota Camry and a 2022 Toyota Camry. This comparison illustrates how rates can vary significantly based on the state you reside in. You can adjust the age and coverage options in the dropdown component to give you a personalized view to help you make an informed decision.

Average Cost of Car Insurance by State
Data filtered by:Results filtered by:
Age:
Age:40
Coverage:
Coverage:Full Coverage
AlabamaCamry 2012 Annual Premium$891Camry 2022 Annual Premium$1,156
AlaskaCamry 2012 Annual Premium$879Camry 2022 Annual Premium$1,135
ArizonaCamry 2012 Annual Premium$1,136Camry 2022 Annual Premium$1,306
ArkansasCamry 2012 Annual Premium$947Camry 2022 Annual Premium$1,243
CaliforniaCamry 2012 Annual Premium$1,432Camry 2022 Annual Premium$1,818
ColoradoCamry 2012 Annual Premium$1,012Camry 2022 Annual Premium$1,291
ConnecticutCamry 2012 Annual Premium$1,063Camry 2022 Annual Premium$1,223
DelawareCamry 2012 Annual Premium$1,708Camry 2022 Annual Premium$2,034
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CAN I DRIVE A NEWLY PURCHASED CAR WITHOUT INSURANCE?

No, you cannot legally drive a newly purchased car without insurance. Your existing car insurance policy may include a grace period, often up to 30 days, to add your new car to your policy. This temporary coverage of the new car gives you time to update your policy with the new vehicle's details. However, if you don't already have coverage, your new car will have to stay at the dealership until you have coverage.

Other Types of Optional Car Insurance Coverages

Liability insurance covers damages to others if you're at fault in an accident, but it doesn't provide protection for your vehicle, personal injuries, or other potential expenses. Adding more coverage beyond liability offers more protection, safeguarding against various risks and financial burdens.

Coverage Type
What it Covers

Umbrella Policy

Extra liability coverage beyond standard policy limits, covering significant property damage or injuries

Roadside Assistance

Emergency services such as towing, jump-starts, flat tire changes and fuel delivery

New Car Replacement

Replaces a totaled new car with a brand-new car of the same make and model

Covers the cost of a rental car while your car is being repaired after a covered claim

Whether it's protection against uninsured drivers, coverage for personal injuries, or assistance with rental cars and roadside emergencies, additional coverage can provide financial security that suits your needs.

How to Lower Insurance Costs

By shopping around and comparing quotes, bundling insurance policies, and understanding specific needs to avoid over-insuring, drivers can find the best deals. Exploring discounts, adjusting deductibles, maintaining a good driving record and considering usage-based insurance or new car discounts can lead to savings.

1
Shop Around

Compare quotes from different insurance providers to find the best deal. Don't just settle for the first offer; take the time to explore various options.

2
Bundle Insurance Policies

If you have other insurance policies, such as home or renters insurance, bundling them with your car insurance can often result in discounts.

3
Ask About Discounts

Many insurers offer discounts for safe driving, good grades (for student drivers), multi-car policies, and more. Ask your provider about any discounts you may qualify for.

4
Don’t Over-insure

Understand your coverage needs and don't over-insure. If your car is brand new, comprehensive and collision coverage might be essential, but tailor the policy to fit your specific situation.

5
Increase Your Deductible

By agreeing to pay a higher deductible in the event of a claim, you can often lower your premium. Just ensure that the deductible is an amount you can comfortably afford if needed.

6
Maintain a Good Driving Record

Safe driving not only keeps you and others safe but can also lead to lower premiums. Avoiding accidents and traffic violations can positively impact your insurance costs.

7
Consider Usage-Based Insurance

Some insurers offer policies based on how much you drive and how you drive. If you're a safe driver and don't drive long distances, this could save you money.

8
Take Advantage of New Car Discounts

Some insurers offer discounts specifically for new cars. Check with your provider to see if this applies to your situation.

9
Improve Your Credit Score

In some states, a better credit score can lead to lower insurance premiums. Paying bills on time and managing credit responsibly can help.

Frequently Asked Questions

Do you need car insurance before you buy a car?
Do you have to have insurance to buy a car?
I bought a new car. How long do I have to get insurance?
I’m buying a new car. Do I need insurance?
Do I need a VIN number to get insurance?
Do dealerships require full coverage insurance?
Do I need insurance to drive off the lot?
Do new cars need full coverage?
What insurance do you need to buy a car?

About Mark Fitzpatrick


Mark Fitzpatrick headshot

Mark Fitzpatrick has analyzed the property and casualty insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. Currently, he leads P&C insurance content production at MoneyGeek. Fitzpatrick has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.

Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.