Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Apr 13, 2022

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Just the Basics

  • Car insurance provides financial protection to the owner against any liability resulting from an accident, theft, or damage
  • Depending on the circumstances of the accident, there are different types of car insurance policies and choosing the right policy can protect you from unforeseen liabilities
  • The ideal solution is to get car insurance before buying the car so your car is safe and sound at all times

Accidents are a common occurrence around the world. Data shows that there are over 1.3 million fatalities every year caused by road traffic accidents. At the same time, more and more people prefer cars over other modes of transport, with global care sales increasing from 63.8 million units in 2020 to 66.7 million units in 2021. With this consistent increase in the number of cars on the road, accidents are bound to occur. Therefore, it is best to be prepared to cover the cost of damages or injuries you may sustain by opting for car insurance.

In most cases, it is mandatory to have car insurance that meets your state’s minimum liability insurance requirement before you drive the vehicle on the road. In addition, there are several benefits of car insurance in protecting the car and the driver against damages. However, as it is technically possible to buy a car without buying insurance first, many a new buyer asks the same question — do I need insurance to buy a car?

The short answer is that while you don’t need insurance to buy a car, you need insurance to legally drive it.

To know if you need car insurance, you first ought to know the basics of what car insurance entails, what types of policies exist, and how they can benefit you in the long run.

What is car insurance?

Car insurance is insurance for vehicles that provides financial protection to the owner against any liability resulting from an accident, theft, or damage. It provides coverage to the car owner and minimizes the cost of repair, replacement and also effectively deals with other related issues.

Accidents have a devastating impact on everyone involved and their aftermath is equally crushing. The long process of settling the cost of damages and other negotiations can be shortened or even eliminated by opting for the right car insurance. Since almost all states require drivers to have insurance before driving the vehicle, it is essential to buy a good policy, or at least one that meets the minimum liability coverage limit set by your state.

Most of the time, people choose to purchase an insurance plan before buying a new car to ensure enough coverage. Third-party or liability insurance is the most common one that covers you against legal and financial obligations in case of a car-related mishap.

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Types of Car Insurance

Depending on the circumstances of an accident, there are different types of car insurance that you can choose for your vehicle. Selecting a good insurance company and the right insurance type is essential to make the process of getting coverage easier. Here are a few popular ones you can consider.

  • Liability Coverage. Liability coverage is the minimum legal requirement to drive a car in most US states. It covers the cost of damages for injuries or property damage that occur during an accident.
  • Comprehensive Insurance. Comprehensive insurance provides extra coverage to owners not limited to accidents. It covers theft, damage resulting from vandalism, weather events, or accidents due to animals.
  • Collision Insurance. This insurance covers the damage caused to your vehicle in collision with another vehicle. It covers the cost of repair or replacement of any components of the car after the accident.
  • Umbrella Policy.  The umbrella policy is suitable for providing coverage for large liability claims made against you. It covers the difference in cost of the claim and the coverage your auto policy offers in an accident you have caused.
  • Medical Payment Coverage. Accidents commonly result in injuries, which can lead to hefty medical bills. A medical payment coverage and personal injury protection provide coverage for your medical bills along with passenger expenses and other medical costs.
  • Uninsured Motorist Coverage. Some drivers may neglect the legal requirement for liability coverage which may cause further issues if they cause an accident. The uninsured motorist coverage covers the damage done by the other driver when the accident is their fault.
  • Underinsured Motor Coverage.  As the name suggests, the policy covers the cost of damages and injuries in an accident caused by a driver who has a policy with insufficient coverage.

Factors That Affect the Price of the Car Insurance Policy

Several factors influence the amount you have to pay as the equated monthly installment for your insurance policy. Every insurance company has different parameters, and the rates for each change accordingly. However, there are a few common factors that influence the pricing of your car insurance –

  • Driving record. The installment rates can be significantly lower if you have a good driving record with no prior history of accidents or traffic violations. On the other hand, you may have to pay a higher amount if you have been in major accidents or if you are a new driver.
  • Location. Location is a primary factor that influences your rate of car insurance. Since many car insurance policies cover damages done due to vandalism, theft, and accidents, insurance companies can charge you more if you park your car regularly in an area susceptible to such events. Drivers from urban areas also have to pay a higher price due to greater susceptibility to accidents.
  • Car usage. Your car is more exposed to the possibility of an accident if it is used regularly, daily, or for a long commute. If you use your car frequently, the rates may be higher than if you were using your car occasionally.

Why is car insurance required?

The right car insurance policy can effectively protect you from unforeseen liabilities. In case of an accident, car insurance can help with the following as well:

  • Protecting against damages. Car insurance protects you, your family, and the other driver from bearing the cost of all damages. Choosing the right policy can cover the cost of damage to the car and medical bills in case of bodily injuries.
  • Reducing liability. If you cause the accident, car insurance can cover you from litigation and the legal ramifications of the event by providing fair compensation as coverage.
  • Providing compensation in case of death. If, in an unfortunate scenario, the car owner meets their demise in an accident, this coverage is given to their family.

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When should you purchase car insurance?

Even though most people purchase insurance before buying a car, it is also possible to purchase insurance after buying the vehicle. Once you buy your car from the dealership, you need to purchase insurance to drive the car home.

However, if you have an existing policy to protect you, focus on upgrading the policy and adding your new vehicle to it. If you meet with an accident while driving the uninsured car home, you may have to face serious penalties. If your state requires you to have insurance and you are caught driving without one, it could lead to fines or suspension of your license.

It is essential to buy a car insurance policy preferably before, or immediately after you buy the car, to avoid gaps in insurance history as it can affect the coverage. Besides, driving without insurance has its risks, as there is nothing to protect you financially. You may have to pay for any damages, injuries, and medical bills on your own.

How long does it take to buy car insurance?

Ideally, it should not take you more than a day to purchase car insurance. Most companies offer insurances at the car dealership itself to make it convenient for buyers to get both simultaneously. To buy car insurance, you will be required to fill out all the necessary information like your current insurance details, driver’s license number, Vehicle Identification Number (VIN), and other personal data.

You may have to get multiple car insurance quotes before purchasing one that meets your coverage needs. You will also have to fill out the details and activate the insurance which can take some time. Therefore, it is best to be prepared and set some time aside to avoid stress or delay on the day itself.

What is proof of insurance?

You are legally required to carry the proof of insurance along with your driver’s license while driving the car. Therefore, while buying your car, you also need to get proof of insurance. Once you purchase a policy from your insurance company, ensure that you take the required proof of insurance whether you are buying a used vehicle or a new one.

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Standard Terms and Conditions of Car Insurance

Insurance policies hold you liable if you cause a car accident. You are also responsible for all costs incurred in the accident. You may have to pay the cost of legal fees and medical expenses out of your pocket if your coverage excludes certain events.

If your vehicle gets damaged in the accident, your insurance will cover either the replacement of parts or repair. Car insurance can also help you avoid devaluation, protect your car from a lawsuit, and reduce monetary losses. The terms and conditions of car insurance vary from company to company. It is essential that you check all the insurance-related documents thoroughly to know all the particulars and exact terms and conditions of your insurance policy.

The Bottom Line: Do you need car insurance?

As stated earlier, car accidents and mishaps are unpredictable occurrences. Car insurance protects you against financial and legal liabilities towards a third party. It covers damage, losses, and offers coverage for personal accidents. Depending on the policy that you choose, you can be protected against major risks that accidents possess.
If you do not claim the insurance in a year, you might be eligible for a No Claim Bonus which is financial compensation making car insurance an affordable option for all car buyers.

So, do you need to buy insurance before buying a car?

Yes.

Protecting your vehicle by means of insurance is a must and you need to do so from day one. Conduct thorough research and compare quotes from different companies to choose insurance that offers protection to your car according to your requirements.

Ready to get car insurance? Find out how much it could cost by entering your ZIP code here.