Cash News
Driving a new (or new to you) car off the dealership lot for the first time gives special meaning to the term joyride. However, you might understandably feel anxious zipping around town in your shiny, mint condition vehicle right away.
Set your mind at ease because if you have an existing auto insurance policy, you’re probably covered even if you haven’t notified your car insurance company yet. It’s called a new car insurance grace period, and it gives you license to drive your new ride on your existing insurance for a short period of time.
What is a new car insurance grace period?
A new car insurance grace period is exactly what it sounds like. If you have an active auto insurance policy, that coverage may temporarily extend to newly purchased vehicles. And while car insurance grace periods are common for most national auto insurance companies, check the fine print on your current policy to ensure you have one before you head to the car dealership.
Driving without insurance carries major consequences in most states, so it pays to be informed about how these grace periods work. You’ll want to be confident you can legally drive your new or used car off the lot — or else call your insurance provider first to secure new coverage.
How long is the car insurance grace period?
The length of a grace period for a new car varies depending on policy and coverage specifics but most car insurance companies offer anywhere from a seven- to 30-day grace period to add a new vehicle to your existing policies. For instance, Progressive specifies you have 30 days to update your insurer, but other companies may not be so generous depending on state insurance requirements.
How does a new car insurance grace period work?
Typically, the new car insurance grace period provides the best coverage available on your policy to a new vehicle for a specific amount of time. So if you have several vehicles on the policy, but at least one has comprehensive and collision coverage, that full coverage would be extended to your new car.
Since drivers are required by nearly every state to be insured, there are few scenarios where you could drive off into the sunset without having your new vehicle covered. If you’re financing or leasing your car, a lender usually requires proof of coverage, including liability insurance, comprehensive and collision coverage.
Although the same grace period applies when you’re purchasing from a private seller, there is no requirement under the law for them to make you prove you have car insurance coverage before you drive away. So it’s on you to make sure your premium is paid and your policy is updated as soon as possible or there could be serious consequences.
5 steps to putting a new vehicle on your car insurance policy
Have an existing policy? Shopping for a new policy? Before adding a vehicle, it makes sense to ensure you’re getting the best auto insurance rates.
1. Research the cost of car insurance before you buy the car
Ahead of setting your heart on the latest model, give yourself a reality check. Insurance premiums on newer vehicles can be significantly more expensive and vary widely depending on insurance providers. Grab a few car insurance quotes before you go, and be clear about what you can (and can’t) afford.
2. Decide the kind of car insurance policy and coverage you’ll need
Before you leave the lot with the keys to your new ride, you’ll be required to provide proof of insurance. And depending on the car you finance or the lease company you use, your current auto insurance coverage may not be sufficient so you should assess your current insurance needs.
According to 2020 data from the National Association of Insurance Commissioners, while most states require liability coverage (including property damage and bodily injury), about 79% of drivers also purchase comprehensive coverage. You may also need to adjust your deductible and your coverage limits depending on the value of your new vehicle and how it is financed or leased.
3. Gather your vehicle documentation
If you’re adding a new vehicle to your insurance policy, keep the following information handy:
-
Make, model, and year of the vehicle
-
License plate number
-
VIN number
-
Name, age, and other info regarding any other driver approved to use the car
Also share with your insurance agent how the new vehicle will primarily be used. Additional coverage may be required if you utilize the vehicle for business, delivery driving or ridesharing.
4. Maximize your discounts
Insurance providers offer an array of discounts, so it can be hard to be sure you’re leaning into all the ones you’re eligible for. Student, veteran, and senior discounts are common but some auto insurance companies also offer behavior-based discounts like usage-based insurance or telematics incentives.
5. Shop for the best car insurance rates
Cheap car insurance is hard to come by in 2024. If you’re suffering from sticker shock at what it costs to add a new set of wheels to your policy, it may be time to shop around for new auto insurance. Some insurance companies may offer a better rate for the specific type or model of car you’re insuring.
For example, even though electric vehicles typically cost more to insure, Kelley Blue Book indicates a Chevy Bolt can actually be cheaper to insure than the average car.
Read more: Shocked by a spike in car insurance rates? Here are 8 ways to save money
What happens if I forget to add my new vehicle to my auto insurance policy?
Taking advantage of the new car insurance grace period has one clear disadvantage. There’s a greater risk you’ll put it off and then forget to add your new vehicle to your policy.
If that happens, it’s called a lapse in coverage and it’s a misdemeanor in most states. However, it still carries consequences like a hefty fine, the potential to have your driver’s license suspended, and the possibility of jail time for repeat offenses.
Besides the legal entanglements, being uninsured means you’re also on the hook financially for property damage, car repairs, and even medical expenses if you’re at-fault in a car accident. A lapse in coverage can also result in higher premiums and result in insurers classifying you as a high-risk driver.
New car insurance grace periods are meant to be a short-term solution so you can enjoy your new ride stress-free. But it pays to contact your insurance company and let them in on the new addition to your garage before you get too far down the road.