A new car usually brings a new set of insurance questions. It is likely worth more than the car it replaces, your lender or leasing company may have its own requirements, and it will lose value quickly in its first years. Setting up coverage before you pick up the keys protects you from the first mile and avoids a scramble at the dealership.
Get quotes before you choose the car
The model you buy affects your premium. Repair costs, theft rates, safety ratings and the car's value all feed into the price, so two cars with a similar sticker price can cost quite different amounts to insure. Ask your insurer or agent for quotes on the cars you are considering before you commit, and count the premium as part of the car's monthly cost. The Budget Calculator shows how a premium and deductible fit your budget.
Add the car before you drive off the lot
If you already have a policy, call your insurer or agent before you pick up the car. Many policies extend some coverage to a newly acquired car for a short time, but the length of that grace period varies by insurer and state, and the new car may only get the same coverage as the car you already insure. If your current car carries only liability, for example, the new one may have no collision or comprehensive until you add them. Adding the car before you drive it closes that gap.
If you do not have a current policy, you need one in force before you drive away, and the dealer will usually ask for proof. Have these details ready:
- The vehicle identification number (VIN), year, make, model and trim
- The purchase date and the address where the car will be kept
- The lender or leasing company's name and address, to list on the policy
- The drivers who will use the car, and whether it replaces a car you already insure
If the new car replaces an old one, keep the old car insured until you no longer own it, and check your state's rules for plates and registration before you remove it from the policy.
What your lender or leasing company will require
If you finance or lease, the contract usually requires collision and comprehensive coverage until the car is paid off or returned, and it often sets a maximum deductible. Leases may also require liability limits higher than your state's minimum. Read the insurance section of your contract and list the lender or leasing company on your policy the way the contract directs, usually as the lienholder or loss payee.
Keep the coverage in force for as long as the contract requires. If it lapses, a lender may buy coverage on the car and add the cost to your loan. That coverage is typically expensive and mainly protects the lender, not you.
Gap coverage and new car replacement
A new car's value often drops faster than the loan balance, especially with a small down payment, a long loan term or an old balance rolled into the new loan. If the car is totaled, collision pays its actual cash value, which may be less than you owe. Two optional coverages deal with this in different ways:
| Topic | Gap coverage | New car replacement |
|---|---|---|
| What it pays | The difference between the car's actual cash value and your loan or lease balance after a total loss | The cost of a new car of the same make and model after a total loss, instead of actual cash value |
| Who offers it | Many insurers as an add-on; dealers and lenders, sometimes as a gap waiver. Many leases include it | Some insurers, as an add-on for cars with collision and comprehensive |
| Common limits | Often excludes your deductible, late fees and extras rolled into the loan | Usually limited to the first model years or a mileage cap, often for the first owner only |
| When it ends | Worth removing once you owe less than the car is worth | Typically ends when the car ages or passes the mileage cap |
Gap coverage from a dealer and from an insurer can differ a lot in price and terms, so compare before you sign, and check whether your lease already includes it. How Car Depreciation Affects Your Coverage explains how the car's falling value changes what each one is worth over time.
Choose deductibles you can afford
A deductible is what you pay toward a covered repair before the insurer pays the rest. A higher deductible lowers the premium, but choose one you could pay from savings tomorrow, and stay within any maximum your lender sets. Many drivers keep a lower comprehensive deductible for glass and weather damage and a higher collision deductible. The Deductible Calculator shows how long a higher deductible takes to pay for itself.
Review the rest of the policy
A new car is also a good moment to check your liability limits, which pay for damage you cause to others. Many drivers choose limits well above their state's minimum. Also consider rental reimbursement, so you have a car while yours is being repaired, and roadside assistance if the car's warranty or a motor club does not already provide it. Some insurers also offer an option that pays for parts from the original manufacturer in repairs. Insurance Types Explained covers each coverage in plain language.
Ask about safety and new car discounts
New cars often come with equipment that some insurers reward, such as anti-theft systems, airbags, anti-lock brakes and driver-assistance features like automatic emergency braking. Some insurers also discount a new or recent model year. Send your insurer the window sticker or feature list so nothing is missed. Sensors and cameras can also make repairs more expensive, so the overall effect varies. Available Discounts lists what to ask about.
A checklist before the first drive
- The new car is on your policy, with coverage that starts before you pick it up.
- Your coverage, deductibles and listed lender meet your loan or lease terms.
- You have decided on gap coverage and new car replacement, and checked whether your lease already includes gap coverage.
- Your proof of insurance is in the car or on your phone.
- Your old car stays insured until you no longer own it.
Your next step
Before you visit the dealership, gather your details with the Rate Checklist and ask for quotes on the cars you are considering. Line up offers for the same coverage in Compare Quotes, and use the Coverage Needs Worksheet to decide on the extras. If you would like help comparing offers, see the plans on Start Your Coverage.
This article is general information to help you understand auto insurance. It is not insurance, legal or financial advice, and AutoAssures.com is not an insurance company. Coverage, prices and rules vary by insurer and state; confirm details with a licensed agent or insurer.
