Do I need proof of insurance to buy a used car?

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Things to Remember...

  • When you’re shopping for a used car, it’s important to research the cost of insurance so that you purchase a vehicle that you can afford to maintain insurance on
  • Having the quotes saved will make binding coverage on your new vehicle easy when you don’t already have insurance
  • If you have existing insurance, the coverage that you have on your policy will automatically cover a new or used car purchase for 14 to 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 that you have both liability and physical damage coverage. Full coverage is a requirement on your auto loan

If you’re on a mission to buy a used car this weekend, it’s important that you bring along all of the documents that you need so that you can avoid delays in the process.

Consumers who are financing their purchase may need to provide proof of income, proof of your identity, proof of residency, and other types of documentation required by the lender.

While the documents that you need to complete a sales transaction vary from lot to lot, all dealerships will ask that you provide proof of insurance before you can drive off the lot in your new pre-owned vehicle.

Since it’s a typical requirement, being prepared before you go on a car-buying mission is a must. Here’s what you should know.

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Why are you required to show proof of insurance?

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Dealers must transact business ethically. When a car is sold, the dealer will gather all of the documentation that’s required by law to transfer the registration and title from the company to the buyer.

One of the advantages of buying insurance from a dealer is that you don’t have to go to the DMV to get your new plates.

Since the dealer is the one who will submit the appropriate paperwork to the DMV, the agent representing the company must verify that 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 at risk.

Do you need to show that you have more than just liability insurance?

If you’re paying cash for your vehicle, you’re only obligated to buy 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. There are other states that also require you to purchase uninsured motorist protection and personal injury protection.

If you’re financing a used vehicle, you have to show more than just proof of motor vehicle liability insurance. Since carrying full coverage on the car is a contract requirement, you must be able to show that you have both comprehensive and collision coverage.

Some dealers will have you sign a legally binding document stating that you have the coverage that’s required and others will ask to see the proof.

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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.

You must not just carry full coverage, you must also have a loss payee clause written on your policy. This ensures that you can’t file a claim for damages and run away with the money without fixing the car.

When there’s a loss payee clause, the lender must sign the claims check before it can be cashed. When there’s a total loss, the lender will use the check to pay off some of the balance of the loan.

Does your existing insurance provide coverage to a vehicle that you purchase?

If you already own a vehicle and you 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 acquire after the term starts for a limited period of time.

Automatic coverage periods last for as little as 14 days and as long as 30 days. The newly-acquired auto will receive the broadest level of protection on the policy.

If you’re replacing a vehicle on the policy with the used car, the coverage may extend for the remainder of the term. It’s important to verify how long you have to add the car.

Do you need to show proof of insurance if you buy from a private party?

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If you decide to skip the dealership and you do your shopping by looking at classified ads, the private seller probably won’t ask you to show proof of insurance.

The dealer asks for proof to satisfy state requirements, but since you have to register the vehicle on your own, you will have to show the DMV your proof of insurance.

How do you buy insurance on your new car without if you don’t have a policy?

If this is your first car purchase or you haven’t owned a vehicle in a while, you need to secure coverage for the used car as soon as you sign the bill of sale. It’s best to start getting 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 low premiums.

If you have quotes saved, all you have to do is enter the vehicle information to apply for the coverage that 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 is to use an online rate comparison tool.

By using an intelligent tool like this, you can compare instant quotes without needing to provide your information multiple times. Enter your information, choose coverage options, and choose a policy that suits you best.

Enter your zip code now to compare car insurance rates in your area!

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