Do I need proof of insurance when buying a used car?

You'll need to show proof of insurance when buying a used car. In most cases, an existing policy on a current vehicle will allow you to leave the dealership. In some states, you may have a grace period of between 14 and 30 days to have the car insured.

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Mathew B. Sims is Editor-in-Chief and has authored, edited, and contributed to several books. He has been working in the insurance industry ensuring content is accurate for consumers who are searching for the best policies and rates...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance...

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Reviewed byDaniel Walker
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UPDATED: Jun 29, 2020

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Used Car Insurance Summary
InsuranceFrom the Experts...
At a minimum, you'll need liability coverage that meets your state's requirements to drive a vehicle off the lotInsurance Information Institute
You may have to purchase additional coverage if you finance your vehicle purchaseInsurance Information Institute
A loss payable clause may also be required for you to obtain the loan to purchase your vehicleInsurance Risk Management Institute
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If you’re on a mission to buy a used car, it’s important that you bring along all of the documents you need so you can avoid delays in the process.

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

While the documents 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 with at least the minimum auto insurance coverage in your state before you go on a car-buying mission is a must. Read this article to find out what you should know before going out on your car-buying adventures.

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Auto Insurance Requirements for Buying a Used Car

What are the insurance requirements for buying a used car? You’ve come to the right place. Keep reading to find out when you should get car insurance, the appropriate amount of coverage you’ll need, whether your existing insurance coverage will protect you, if you’ll need to purchase new or additional coverage for the car you’re buying, and more.

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Do I need auto insurance to buy a car?

Because insurance is a requirement in order for you to legally drive, you will need it in order to buy a car. You’ll need at least minimum liability coverage, though depending on how you finance the purchase, you may need additional coverage (which we’ll discuss later).

Do I have to show proof of insurance to buy a car?

Dealers must transact business ethically. When a car is sold, the dealer will gather all of the documentation 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 your state’s department of motor vehicles (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 financially at risk.

Do I need more than just liability insurance?

You do need insurance to buy a car, but 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. Watch this video to learn more about minimum liability coverage.

There are other states that also require you to purchase uninsured motorist protection and personal injury protection as a part of your liability coverage. This video provides a quick overview of uninsured and underinsured motorist coverage. Take a look.

To learn more about personal injury protection, take a minute to watch this video.

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 usually a contractual 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 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.

To get an idea of what this might cost you, we pulled National Association of Insurance Commissioners (NAIC) average rates for the various forms of core coverage you may be required to carry in order to purchase a vehicle and summarized them in the below table.

Average Auto Insurance Rates by Coverage Type Across the Country
Auto Insurance Coverage TypeCountry-Wide Average Cost per YearCountry-Wide Average Cost per Month
Liability$516.39$43.03
Collision$299.73$24.98
Comprehensive$222.86$18.57
Combined/Full$954.99$79.58
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Keep in mind these are national averages, which you can use as a baseline, but the rates you’ll pay will vary based on where you live and a number of personal factors that determine your auto insurance rates like your age, driving record, credit score, etc.

Not only will you need to carry full coverage, you may also be required to have a loss payable clause written on your policy. According to the Insurance Risk Management Institute (IRMI), this means that only the cost of the actual loss will be covered (meaning the total value of the vehicle may not be paid out).

When there’s a loss payable 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. This buying a new car insurance grace period will allow you to drive off the lot with your new-to-you vehicle.

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 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. 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?

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 if you’re buying from a private seller, you will have to show the DMV your proof of insurance.

If you are 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 a car insurance policy to drive home is necessary. In most states, it is illegal to drive a vehicle without insurance.

How do you buy insurance on your new car 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 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 is to use an online rate comparison tool, like the one on this page. 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.

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The Bottom Line for Auto Insurance when Buying a Used Car

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 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: Proof of Insurance When Bbuying a Used Car

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.

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 in order to be able to purchase a vehicle and drive it off the lot. However, if you already have a car insurance policy, you can show proof of that coverage. You’ll have a grace period after purchase of between 14 and 30 days to either add the new vehicle to your policy or transfer the coverage from your old vehicle to the new one.

Is there a grace period for car 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 be different than in California or New Mexico. Call your insurance agent to find out the exact grace period they provide in your state.

How do I get auto insurance before I buy a car?

If you don’t already have insurance, you can technically purchase coverage prior to completing the transaction on your vehicle. You will need to provide very specific vehicle information to the insurer, however, so you’ll need to know exactly what you’re planning to purchase. The best way to do this is to find the vehicle you want and make an 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 in order to buy insurance coverage. This will include the vehicle identification number (VIN), odometer mileage, make and model, etc.

To make sure you have the coverage you need to purchase your used car, enter your ZIP code now to compare auto insurance rates in your area.

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