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When should I buy auto insurance?

The lowdown...
  • When you buy a vehicle and it’s going to be registered in your name, you legally need to buy insurance on the car
  • You must buy at least a minimum amount of insurance and also physical damage coverage if you’re financing
  • Selecting sufficient limits of liability is important when you need to protect your assets and your future income
  • If you don’t own a car and you borrow cars often, you still should have a nonowner’s car insurance policy in place
  • Some states require you to file an SR-22 when you have a major conviction by buying and maintaining a policy

When you’re buying a car you need to time your auto insurance purchase right. If you don’t buy auto insurance as soon as you make a vehicle purchase, you could be left paying for your own expensive repair bills and someone else’s medical bills without any real financial help.

Instead of having to pick up the pieces after an incident, it’s best to be prepared before anything ever happens.

Get started finding the right insurance for you. Just enter your zip code in our free quote tool to begin.

You don’t have to be in the process of buying a car to have a need for insurance. There are a few scenarios where you could benefit from getting quotes and securing a policy in your name.

Here’s what you need to know so that you never put yourself at risk when you’re licensed to drive a private passenger car:

When to Buy Insurance on a New Car

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The most common scenario where you’ll need to buy auto insurance in your own name is when you’re buying a car, financing a car, or leasing a car in your own name.

Practically all states have a vehicle code that says that insurance is either directly or indirectly required. If you’re doing business with a dealer, you can’t even leave until you have coverage.

What type of insurance you need to purchase depends on how you’re buying the vehicle. Knowing how much insurance that you need to have before you want to leave the dealership and drive off with your car is important.

If you don’t know, you could be left trying to find insurance in the finance office right before the office closes. Here are the common requirements:

  • Paying cash for a car – the dealer will only require that you show proof that you have a minimum amount of insurance as required under state law
  • Financing a car – the dealer will require proof of liability insurance and proof that you have both comprehensive and collision insurance to satisfy loan requirements
  • Leasing a car – the dealer and lessor will require proof of higher limits of liability and also proof of comprehensive and collision insurance with an acceptable deductible

When to Buy Insurance on Private Party Changes of Ownership

If you’re buying a car from a private seller or someone is giving you their vehicle, you still have to insure the car. As soon as ownership is transferred to you, you become the owner and you’re liable for any losses that occur while the car is being driven.

As long as you don’t have a loan, you only legally have to purchase the required coverage.

While you technically don’t have to prove that you have coverage on a car until you make the trip to the DMV and you get tags in your name, waiting could put you at risk.

The prior owner, if they’re prepared, will submit a release of liability to the DMV. When this is processed, the DMV expects you to be able to show you have insurance or you could be fined.

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Buying Insurance When You Have a Coverage Lapse

If you had insurance in the past and the policy has lapsed, you need to buy coverage as soon as possible. Knowingly driving without insurance is a crime. In some states, you can even be charged with a misdemeanor offense if you accidentally drove without required coverage.

Your auto insurance can lapse for a few different reasons. The most common reason that a policy lapses is because the policyholder doesn’t pay their premiums on time.

The insurer can also cancel your policy if you do any of the following:

  • violate the terms of your contract
  • file a fraudulent claim
  • lose your license

If, for any reason, your coverage ends, start to shop for coverage immediately.

Looking for Coverage When Your Policy is Renewing

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Renewals will come once every six months or once every year. At this time, the insurer is free to bump up your premiums as long as they can show the state they need to charge their clients more.

Most companies must send you renewal invoices or non-renewal notices in the mail at least 30 days before the expiration date on your declarations page.

If you’re not happy with the renewal documents that you receive in the mail, you can buy insurance elsewhere.

Start by shopping the market to see if the rates you’re being quoted in your area are competitive with other local rates.

Then, decide if the savings is worth the time you’ll spend switching carriers. Nowadays, switching carriers is especially easy.

Buying Insurance When You Don’t Own a Car

If you’re a licensed driver but not a vehicle owner, don’t automatically assume that you can dodge paying an insurance bill.

You can still have an accident if you’re driving someone else’s car and there’s no guarantee that the car’s insurance will follow you. Other parties can come after you even if you didn’t own the car.

While your premiums will be lower than they would if you insured a car, you still need to consider buying at least a nonowner’s car insurance policy. This will provide you with liability insurance when you’re in any car that you don’t own or drive regularly.

Buying Insurance if You’re Required to File an SR-22

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An SR-22 is a certificate that acts as proof of financial responsibility. Some states assess SR-22 requirements to drivers who get convicted of driving without insurance or driving under the influence.

If you want to keep your license, you’ll have to buy a standard policy or an SR-22 policy so that the certificate can be filed.

As you can see, you don’t only buy insurance when you buy a car. It’s all about the timing. If you’re shopping for a car, inheriting a car, or you’re renewing your policy, shop around for quotes online and find the best deal for sufficient coverage.

Start comparing quotes today using our free comparison tool!

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