What is the new car insurance grace period?

Buying a new car can be an exciting time — but as you may know, several tasks are involved in completing that purchase. One of those tasks is ensuring you have the appropriate car insurance your state requires to drive legally. Almost every state has minimum levels of coverage required, which you can generally find on your state’s department of motor vehicles website or from an insurance agent. Many insurers offer a grace period, lasting from seven to 30 days, where your old policy can be used to cover your new car. This gives you time to update your coverage or purchase new car insurance. Bankrate created this guide to explain the insurance grace period for a new car.

Is there a grace period for car insurance when buying a new car?

The answer to this question is “maybe.” Although not all insurers may offer a new car insurance grace period, many do. If you are purchasing your new car to replace one you previously owned and insured, you can likely take advantage of the grace period if your insurer offers it. That grace period may last from seven to 30 days and is meant to give you time to update your policy. 

When you buy your new car, one of the first things you should do is contact your insurance company to cancel coverage on your old vehicle and update your policy to reflect your new purchase. If you didn’t have insurance before, you’ll probably want to gather quotes from insurers to find the company that offers you the most affordable rate. In that case, you will not have access to a grace period because you did not have a policy before.

How does my car insurance coverage work in a grace period?

If you have full coverage car insurance on a vehicle on your insurance policy, that same coverage will probably extend to your new vehicle during a grace period. If you carry liability-only coverage, you may have significantly limited coverage on your new vehicle during the new car insurance grace period. If you have multiple vehicles on your policy with different levels of coverage, typically, the best coverage on your policy temporarily applies to your new car. Temporary coverage applies regardless of whether you buy your newer vehicle through a dealer or a private seller.

How long does a car insurance grace period last?

Depending on your car insurance policy and current level of coverage, a car insurance grace period can last anywhere from seven to 30 days from the purchase date of your new vehicle. The level of coverage on your new vehicle may be limited during the grace period, and in some cases, your deductible would still apply to any claims filed. Checking in advance with your insurance company can help to prevent any gaps in coverage and associated financial risks.

When does a car insurance grace period not apply?

If you do not have an active car insurance policy when buying a new car, the insurance grace period will not apply. In this case, you’ll need to shop for car insurance and simply get a new insurance policy for your vehicle. Depending on how much time you have before needing to drive off the car lot, it may be worth considering getting multiple car insurance quotes to find the best rate for your needs. Rates can vary drastically from company to company based on several factors specific to you and your car.

If you have an active policy, a car insurance grace period may not apply in a few scenarios, such as if your insurer does not offer a grace period or you have exhausted your grace period coverage. In either case, you’ll need to add your vehicle to your policy to have coverage. Without it, you could be considered driving without insurance should an incident happen, which could have major consequences.

Frequently asked questions

• Do I need insurance before registering my new vehicle?
  

  Yes, most states require you to have at least the minimum car insurance coverage required by law. You’ll typically have to show proof of insurance before you can register your new vehicle with your local motor vehicle department. Check the department of motor vehicles website to learn what documentation is necessary (like an insurance ID card or declarations page).

• Do all insurance policies have a 30-day grace period?
  

  Not necessarily. Not all insurance providers or car insurance policies offer a 30-day grace period. Some might offer shorter grace periods or none at all, which is why you might want to talk with your car insurance provider or check your policy documents if you have active car insurance. If your insurer offers 24/7 customer support, you should be able to contact them at any point in your car-buying journey.

• What happens if your insurance coverage lapses?
  

  In all states except New Hampshire, car insurance is mandatory for anyone driving on public roads. Failure to have an active policy can lead to civic penalties that may, depending on your state, include fines, points on your license, or suspension. But there’s another outcome: if you do not have insurance on your vehicle, you would likely be personally liable out of pocket for any costs related to damage or injuries in an accident you cause. An insurance policy can protect you from the potentially catastrophic costs associated with a serious accident, so it is vital to ensure that you adhere to state insurance laws when you purchase your car.