In a perfect world, you buy a new automobile, slide behind the wheel, and zoom out of the dealership car lot without a care. If you try to do this without insurance, however, you might have a nightmare on your hands. All states require that drivers either purchase insurance or that they have the financial wherewithal to pay for any damages they cause in an accident. You typically can't leave the lot in your new vehicle without some type of coverage.
Driving without car insurance is absolutely unacceptable. Not only is it illegal to do so, but it can also expose you to heavy financial liability in the event of an accident.
Obtaining Temporary Coverage
If you've traded in your old car, you might have insurance even if you don't immediately reach out to your carrier to let the company know about your purchase. Some insurers will stretch your coverage for a limited period of time to protect your new vehicle. This gives you a grace period to notify the company that your old car is gone and that you now have a new one. The dealership will probably ask for proof of your existing current insurance before handing over the keys. Many will call your insurer for you and bind coverage for your new wheels as part of the transaction. If the dealership doesn't do this for you, however, you must make the call yourself as soon as possible. At most, you'll have 30 days before your extended coverage lapses, but you may only have 14 days or no grace period at all. Your best bet is to call your insurer from the dealership and make sure.
Your First Car
If your new car is your first vehicle purchase, you won't have an existing policy to fall back on. In this case, you'll probably have to purchase coverage before you drive off the lot. In most states, you can't drive uninsured. In those that do allow it, you must self-insure your vehicle by placing a cash deposit or bond with the government to pay for damages in case something goes wrong. Depending on where you live, it's unlikely the dealership will let you drive away without proof that you've made one arrangement or the other. Dealerships usually have their own insurance policies, but after the transaction is complete and you officially own the automobile, this insurance no longer covers the vehicle.
Potential Complications to Consider
Even if your old policy extends to your new vehicle for a period of time, this can still leave you vulnerable if you have an accident. If you traded in a mess on wheels that didn't have much value, you may have only bought liability coverage to pay for any damage you might cause to someone else's vehicle. You might not have purchased collision or comprehensive coverage to protect your own car because it wouldn't have been worth the increased premiums. If you drive off the car lot with a spanking new vehicle, your coverage doesn't automatically change to accommodate the purchase – you'd still have only liability coverage unless you contact your provider immediately to update your policy and increase coverage. If you're involved in a traffic mishap before you do so, you'd have to pay for repairs to your vehicle out of pocket.
Important Lender Requirements
As a practical matter, if you finance your new vehicle, it's unlikely that the lender will let you drive away without some guarantee that you have comprehensive and collision coverage in place. Without such coverage, if your new car is totaled, you would either have to keep making the payments on it anyway or your lender would have to sue you to recoup the money it gave you for the purchase. Lenders safeguard against this eventuality by requiring full coverage on cars new vehicles they're financing.
Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.