Do you need insurance to test drive a car at the dealership?

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Things to Remember...
  • Dealerships must insure their inventory of vehicles so they don’t lose out on profits if a car is stolen, vandalized, or crashed
  • When the dealer sells the car and the bill of sale is signed, it is no longer the company’s legal responsibility to insure the car
  • Even though you can’t be fined for test driving a car off the lot, you are at risk of being sued if you get into an accident
  • The dealership carries special fleet insurance and liability insurance that pays for damages that can happen during a test drive.
  • The dealer will hold your license and record your information on a waiver, which must be signed for insurance purposes before a test drive

When you’re buying a car, one of the first things that you need to do before you consider making an offer is drive it. No matter how beautiful a car looks on the outside, it’s the mechanical condition that matters most.

After all, a nice-looking car with a faulty engine or transmission isn’t worth much if it can’t get you where you need to go.

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When you test drive a car, you get a feel for the controls and you listen for rattles, clunks or other signs that problems could be looming. While it is important to make sure everything is in good working order, it’s also important to make sure you’re covered under insurance while you do so.

Here’s what you need to know about insurance coverage when you’re test driving:

When You’re Buying from a Dealer, the Dealer Has Insurance

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When a commercial dealer has an inventory of cars for sale, they buy a blanket policy that will pay for damage to the cars and liability claims made while an employee or a customer is driving the car.

If the cars are vandalized on the lot, stolen, or crashed, there will typically be coverage to pay for the repairs.

With this being said, the dealer’s insurance is expensive and filing a claim brings the rates up even higher. To combat costs, most plans have high deductibles and specific exclusions. It’s important that you verify that you’re covered under the dealer’s policy as a test driver before you go for a spin.

Read the Fine Print Very Closely

At surface value, the dealer’s insurance will be considered the primary coverage if you need to file a claim.

Unfortunately, every state has a different rule and there may be times where you can be held liable for damages to the dealer’s vehicle while it’s in the client’s custody. This is why you should read the documents that you sign closely.

Every reputable dealer in the industry will ask you to sign a document stating that you have a valid license.

The company will also ask you to provide a copy of your license so they can put it on file if they need to file an insurance claim. Look at the document and see if it says you’re responsible for damages sustained in a test drive.

Can the dealer hold you liable for damages?

Most people don’t like dealing with sales agents at car dealerships, but if you have an accident the chore can turn into a nightmare. Depending on what led to the accident, the auto dealer might find you liable for the damages.

It’s not out of the ordinary for a dealer to claim the car was in your custody and your actions led to the damage.

While this can happen, the dealer’s policy is still primary. The manager may try to get you to buy the car to take over the responsibility of repairing it, but they can’t legally make you do so.

The worst that can happen is the dealer’s insurance company can subrogate and try to collect from your insurer after the car has already been repaired.

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Will my insurance pay when I have a loss in the dealer’s car?

The dealer’s policy is primary for damage claims, but that’s not to say the dealer has to pay for all liability claims. Showing proof of insurance before you test drive a car isn’t a requirement, but you might feel more comfortable having at least liability coverage before you operate a car.

One of the unique things about Personal Auto Policies is how the contract is written.

You can only buy a standard form of coverage if you own a vehicle in your name, but that doesn’t mean the coverage applied only while you’re driving your car. Under your contract, your liability coverage will follow you while you’re driving a non-owned car.

What is a non-owned car?

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Insurance policies have very detailed definitions to describe what terms mean as they apply to the contract. Under the definition of covered autos, it says that non-owned vehicles are covered if they are temporary substitutes to your vehicle. It also says that you’re covered when driving a non-owned vehicle if you make third-party claims.

What happens when you’re test driving a car for sale by a private party?

The situation can get a bit more complicated when you’re buying a car from a private seller. When cars are sold on the private market, they are covered by standard personal auto insurance. In some cases, the primary policy will pay for damage while their car is being operated by someone not listed as a driver.

To protect yourself, you should ask the seller to call their agent and ask if you’re covered to drive the car.

It could be helpful to ask the owner to sign a statement saying that you have permission to drive and that the car is insured. This can help you avoid unfounded claims if there is a crash.

If you don’t already have insurance, it can be helpful to buy a non-owner’s policy for liability protection. It will protect you while you borrow cars, rent cars, or test drive them. To find affordable non-owner’s insurance, use an online rate comparison tool. You can even get instant quotes for the cars you want to buy.

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