What You Should Know About Insurance When Buying a New Car

If you're purchasing a new vehicle, there are some important things to know about insurance.


Article QuickTakes:

After months of research, test drives, and running your finances, you're almost at the finish line and ready to buy a new car. Soon, you'll get behind the wheel and drive off into the sunset.

But first, there's one very important thing to take care of: your car insurance. Navigating the process of getting insurance when buying a new car can feel tricky. but it's entirely doable and likely necessary.

Here are some commonly asked questions about new car insurance and details around buying coverage.

Do I Need Car Insurance for a New Car?

In most cases, yes. Every state except for New Hampshire and Virginia requires a minimum level of car insurance in place before you drive off the lot. The coverage generally specifies a minimum dollar amount for property damage, bodily injury, and death due to an accident. Your car insurance helps to cover the cost of damages and medical bills if you're in an accident.

Minimum requirements vary by state. You can usually find your state's requirements on the department (DMV) or registry (RMV) of motor vehicles website. Here's a full list of RMVs and DMVs to help you get started. It's important to note that you can always add more coverage to your car insurance, but you can't go below the minimums laid out in your state.

How Much Does Car Insurance Cost?

There's no one set rate for car insurance. Instead, how much you pay varies by several factors: including where you live, your driving record, and even your marital status. Here are a few examples of what's factored into the cost of car insurance:

  • Age: how old you are plays a role. For instance, younger drivers (typically under age 25) often pay more for coverage
  • Personal information: where you live, your driving record, and your credit score all factor into your rates
  • Car type: if your vehicle has a lot of safety features included, that can potentially help to reduce your rate
  • Selected coverage: if you decide to go above the minimum required coverage, you may pay more

Your insurer analyzes all this information and will offer a related rate for your annual premium. Currently, the average annual premium for car insurance in the U.S. is $1,655 or roughly $138 per month. In general, younger drivers tend to pay more for insurance (due to their relative inexperience), as well as those with newer cars, and people who live in areas where there may be a higher likelihood of car theft.

Over time, there are ways to potentially lower your premium. For example, some insurers provide a "good driver" discount offering lower rates if you aren't in any accidents for a set period. Others may offer a discount if you bundle your home, renters, or car insurance together. You may also belong to an alumni group or club that works with a specific insurer offering lower rates.

So, as you dig into the process, call around and search online to see if you have options to lower your rates before you lock them in.

Do I Need Car Insurance Before I Buy My New Car?

In most states, you do. While your dealership and lender will take care of most of it, it's your responsibility to make sure you have insurance in place before you finalize the purchase process.

If you already have car insurance, contact your insurance representative and let them know you're buying a new car. You will still need a new policy for your new car, but since your insurer has all your information, it can speed up the process. Often, your existing proof of coverage is enough to satisfy dealers. Many insurers also allow for a grace period—usually between a week to a month—to switch your old policy to a new one. For example, if you buy a car Friday night after work, your existing car insurance will still cover you until the office opens again on Monday. Make sure you update your policy to include your new car as soon as possible.

When Should I Start Shopping for Insurance When Buying a New Car?

If you don't currently have insurance, you'll want to get an idea of the expected costs before you buy the car. You may plan to pay your car insurance premium monthly, so it's helpful to get a general sense of the expense when you're planning your new car budget. For instance, it may turn out a car you had your eye on has much higher premiums than expected, potentially blowing your budget.

Once you've narrowed down the types of cars you want to buy, start shopping for insurance quotes. With most major insurance providers, you can go online and enter basic information about yourself and the car, including the make, model, year, and trim level, plus the type of coverage you want. From there, you'll get a list of quotes that can help you figure out the costs and your budget.

How to Get Insurance When Buying a New Car

When you've decided on a particular car and have started the process to buy or lease it, then you'll want to move forward with officially insuring it.

The good news is, unlike many other types of insurance, you can get car insurance very quickly—usually in less than a day. To get the process moving forward, your insurer will ask for more in-depth information to finalize your premium rate, including:

  • Your car's vehicle identification number (VIN)
  • The purchase price
  • How you plan to use the vehicle (e.g.: offering ride-share services or just commuting to work)
  • Your personal information, such as your license and address. This is also true for any other drivers in your household you want to insure

Finally, confirm that your coverage starts the day you plan to pick up your car. Although you can buy the vehicle without insurance, it will sit on the lot until you provide the dealer with proof of coverage (if your state requires it).

With your coverage in place, it's time to pick up your new car and take it for a spin!

Know the Steps Before You Buy

Getting a new car can be exciting. Just make sure you know all your insurance needs ahead of time. That way, you can enjoy driving your new car with no delays.

This site is for educational purposes only. The third parties listed are not affiliated with Capital One and are solely responsible for their opinions, products and services. Capital One does not provide, endorse or guarantee any third-party product, service, information or recommendation listed above. The information presented in this article is believed to be accurate at the time of publication, but is subject to change. The images shown are for illustration purposes only and may not be an exact representation of the product. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.
author photo
Liz Froment
I love learning about money — deals, financing, and what to avoid. All that came in handy after my own extensive car search, where I put everything I learned about the financial side of things to use. That's where I can help you too. I want to give you tools to help you find the best vehicle that will fit your practical and financial needs.