Do I need proof of insurance when buying a used car?
You'll need to show proof of insurance when buying a used car. An existing auto insurance policy on a current vehicle will allow you to leave the dealership in most cases. How long you have to get insurance after buying a used car varies. You may have a grace period of between 14 and 30 days to have the vehicle insured in some states. If you don't have proof of auto insurance, you can get a used auto insurance policy in less than 20 minutes.
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UPDATED: Oct 22, 2021
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- At a minimum, you’ll need liability coverage that meets your state’s requirements to drive a new or used vehicle off the lot
- You may have to purchase additional coverage if you finance your used car purchase
- A loss payable clause may also be required for you to obtain the loan to purchase your used vehicle
If you’re on a mission to find out how to buy a used car, the first thing you must learn is all the necessary documents to bring so you can avoid delays in the process.
You may be wondering, do I need insurance before I buy a used car? Do I need proof of insurance when buying a used car? The answer to both of these questions is yes.
Consumers financing their purchase may also need to provide proof of income, proof of identity, proof of residency, and other documentation types required by the lender.
Since it’s a typical requirement, be prepared with coverage that at least meets the minimum auto insurance requirements in your state before you go on a car-buying mission.
Looking to buy auto insurance for a used car? Enter your ZIP code in our free tool to compare auto insurance rates from multiple companies, so you have the used auto insurance coverage you need.
What Are Auto Insurance Requirements for Buying a Used Car?
What are the auto insurance requirements for buying a used car? You’ve come to the right place.
Keep reading to find out when you should get auto insurance, the appropriate amount of coverage you’ll need, whether your existing insurance coverage will protect you if you need to purchase new or additional coverage, and more.
Do I need auto insurance to buy a used car?
Because insurance is a requirement for you to drive legally, you will need it to buy a car. You’ll need at least minimum liability coverage, as required in your state. Depending on how you finance the purchase, you may also need additional coverage (which we’ll discuss later).
Do I need proof of insurance to buy a car?
Do dealerships require proof of insurance when buying a car? Dealers must transact business ethically. When a car is sold, the dealer will gather all the documentation required by law to transfer the company’s registration and title to the buyer.
One of the advantages of buying a used car from a dealer is that you don’t have to go to your state’s department of motor vehicles (DMV) to get your new plates. If you have insurance when buying a used car the process will go quickly and smoothly.
Since the dealer is the one who will submit the appropriate paperwork to the DMV, the agent representing the company must verify you have the insurance that’s required by law. If you can’t provide proof, the company can’t give you the keys until you can.
It would be irresponsible to let you drive off knowing there’s a chance that you’re putting others on the road financially at risk.
Do I need more than just liability insurance?
You do need insurance to buy a car, but how much depends on how you’re purchasing the vehicle.
If you’re paying cash for your vehicle, you’re only obligated to purchase the minimum amount of insurance that’s required by state law. In most states, you only have to have bodily injury and property damage liability coverage.
Some states also require you to purchase uninsured motorist protection and personal injury protection as a part of your liability coverage.
If you’re financing a used vehicle, you’ll have to show more than just proof of motor vehicle liability insurance. Since carrying full coverage on a financed vehicle is usually a contractual requirement, you must show that you have both comprehensive and collision coverage.
Some dealers will have you sign a legally binding document stating you have the required coverage, and others will ask to see the proof.
Why is full coverage required on financed cars?
When you finance a car, the lender is the legal owner until the loan is paid off. As long as you owe money on your loan, you’ll be required to maintain full coverage insurance.
The purpose of the requirement is to protect the lender if the property is damaged or destroyed.
To get an idea of what this might cost you, we pulled the National Association of Insurance Commissioners (NAIC) average rates for various core coverages that you may be required to carry to purchase a vehicle.
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Keep in mind these are national averages, which you can use as a baseline. There are a number of factors that affect auto insurance rates, like your age, driving record, credit score, etc., which can have a significant impact on how much you pay.
Not only will you need to carry full coverage, but you may also be required to have a loss payable clause written on your policy. This means the actual loss cost will be covered, but the vehicle’s total value may not be paid out.
When there’s a loss payable clause, the lender must sign the claims check before it can be cashed. In the case of a total loss, the lender will use the check to pay off some of the loan balance.
Does your existing insurance provide coverage to a vehicle that you purchase?
If you’re buying another vehicle when you already own a car and have existing insurance, showing proof of your coverage won’t be too difficult.
Under the newly acquired vehicle provision of your insurance contract, your coverage will automatically extend to a vehicle that you receive after the term starts, for a limited time. This auto insurance grace period will allow you to drive off the lot with your new-to-you vehicle.
If you can use the newly acquired vehicle provision under your policy, how long do you have to get insurance after buying a used car?
Automatic coverage periods last for as little as 14 days and as long as 30 days. The newly-acquired vehicle will receive the broadest level of protection on the policy.
If you’re replacing a vehicle on the policy with a used car, the coverage may extend for the remainder of the term. It’s important to verify how long you have to add the vehicle. Check with your GEICO, Progressive, Allstate, or other insurance company agent to be sure.
Do you need to show proof of insurance if you buy from a private party?
Do you need insurance if you’re buying a car from a private seller? If you decide to skip the dealership and shop through classified ads, the private seller probably won’t ask you to show proof of insurance.
The dealer asks for proof to satisfy state requirements. Since you have to register the vehicle on your own, you’ll have to show the DMV your proof of insurance.
If you’re asking, “Do I need insurance to buy a car from a private seller?” the answer is “yes” if you plan on driving the car right away. Buying an auto insurance policy even to drive home is necessary because it’s illegal to drive a vehicle without insurance in most states.
How do you buy insurance on your new car if you don’t already have a policy?
If this is your first car purchase or you haven’t owned a vehicle in a while, you’ll need to secure coverage for the used car as soon as you sign the bill of sale. It’s best to compare used auto insurance quotes before you even leave your home.
By doing this, you can see which models cost a lot to insure and which have lower rates.
If you have quotes saved, all you have to do is enter the vehicle information to apply for the coverage you’ve selected.
Most of the time, you’ll need nothing more than your VIN, odometer reading, and lender information to complete the application. Once the application is complete, you will be asked to submit your first payment.
There are several ways to get auto insurance quotes. One of the quickest ways to compare rates and find affordable used auto insurance is to use an online rate comparison tool, like the one on this page.
Using an intelligent tool like this, you can compare instant quotes without needing to provide your information multiple times. Enter your information, select coverage options, and choose a policy that suits you best.
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What Is the Best Auto Insurance Coverage for Used Cars?
The best auto insurance coverage for used cars varies depending on where you live, your needs and unique situation, your budget, and other factors.
However, we did a little research and found that there are a few companies across the country that offer the best rates for used cars from a cost perspective.
Specifically, GEICO, State Farm, and Farmers offer the best rates, based on country-wide averages. However, as we already noted, this may vary based on where you live and your needs.
Do You need auto insurance to buy a used car?: The Bottom Line
To summarize everything we’ve talked about today,
- Knowing not only what insurance you need but when you need to be covered is a key component of managing your auto insurance policy.
- When you’re shopping for a used car, it’s important to research the cost of insurance so that you purchase a vehicle you can afford to maintain insurance on.
- Having the quotes saved will make buying coverage for your new vehicle easy when you don’t already have insurance.
- If you have existing insurance, the coverage you have on your policy will automatically cover a new or used car purchase for between 14 and 30 days.
- The sales agent will ask you to provide proof of insurance after you’ve signed the bill of sale. You need to be able to show proof of coverage that complies with state law before you drive off.
- If you finance the used car, you must show you have both liability and physical damage coverage. Full coverage is also often a requirement on your auto loan.
And remember that comparison shopping is the best way to find affordable coverage for your needs.
Frequently Asked Questions: When you buy a used car do you need insurance?
Do you still have questions about buying insurance for a used car? Read through these frequently asked questions to learn about how you get insurance before buying a car and more.
#1 – How long do you have to get insurance after buying a used car?
In general, as we’ve already discussed, buying insurance and showing proof of that coverage is required to be able to purchase a vehicle and drive it off the lot. However, if you already have an auto insurance policy, you can show proof of that coverage.
If you’re wondering what to do after buying a used car and suddenly realizing you don’t have insurance, don’t worry. You’ll have a grace period after the purchase, which is between 14 and 30 days.
You can either add the new vehicle to your policy or transfer your old vehicle’s coverage to the new one.
#2 – Is there a grace period for auto insurance when buying a used car in California?
How long you have to get insurance on a used car is generally the same as how long you have to get insurance on a brand new vehicle.
However, the grace period may vary by state, so how long you have to get insurance on a new car in Alabama may differ from California or New Mexico. Call your insurance agent to find out the exact grace period they provide in your state.
#3 – How do I get auto insurance before I buy a car?
If you don’t already have insurance, you can purchase coverage before completing your vehicle’s transaction. You will need to provide specific vehicle information to the insurer, however, so you’ll need to know what you’re planning to purchase.
The best way to do this is to find the vehicle you want and work with the seller to indicate that you plan to buy that specific car.
Once you’ve indicated your plan to purchase, work with the seller to obtain the necessary vehicle information to buy insurance coverage. This will include the vehicle identification number (VIN), odometer mileage, make and model, etc.
Ready to buy auto insurance? To make sure you have the coverage you need to purchase your used car, enter your ZIP code now to compare used auto insurance rates in your area. Which auto insurance company is for you? Find out now.