Do Car Dealerships Offer Temporary Insurance?

Last Updated on September 21, 2023

Most car dealerships offer temporary insurance, making it easy to drive off the lot with your new vehicle.

However, depending on your policy, you may not need the dealership’s temporary insurance. Your personal policy often covers new vehicles, rental cars, and other vehicles you drive.

Keep reading to find out everything you need to know about car dealerships and temporary insurance.

Yes, Most Dealerships Offer Temporary Car Insurance

If you walk up to a dealership and buy a car, then you should be able to buy temporary car insurance from that dealership.

The dealership’s temporary car insurance covers your newly purchased vehicle at a fixed rate. You may pay a certain amount per day, for example, to cover your vehicle until you add it to your personal policy.

Not all dealerships, however, provide temporary car insurance. Some dealerships work with a specific insurer to provide temporary coverage on new vehicles, while other dealerships have no in-house insurance system whatsoever.

Some dealerships call it “drive away” insurance. Whatever you call it, it covers your new vehicle similarly to any full coverage policy. It may last one week or one month, giving you time to shop around for car insurance for your new vehicle.

Dealerships Require Proof of Insurance

All car dealerships require proof of insurance when you lease or finance a vehicle. If you are unable to provide proof of insurance, then you need to buy temporary insurance from the dealership to drive the vehicle off the lot.

When you are leasing or financing a vehicle, you do not own the vehicle outright. The dealership or financing company owns the vehicle until you finish making payments. If you crash the vehicle without insurance, then it’s not just you who loses; the dealership or financing company loses, too. That’s why they want proof of insurance.

Does My Personal Insurance Policy Cover New Vehicles?

In many cases, your personal auto insurance policy covers new vehicles you purchase, allowing you to avoid buying temporary insurance from the dealership.

Many insurers have a grace period, for example, allowing you to drive a new vehicle for a certain number of days before adding it to your policy. Other insurers only cover the trip from the dealership to your garage.

Your insurance may or may not cover new vehicles based on the following:

Insurance Company Policy: Some insurers cover new vehicles as part of standard policy coverage. This rule differs from insurer to insurer. Contact your insurer to verify if your policy covers new vehicles.

State Insurance Laws: Some states require insurers to cover new vehicles, while others do not. Check the rules in your state to determine if your policy covers new vehicles.

Generally, most states and insurers cover new purchases with a specific grace period. That grace period could range from two days to 30 days. Contact your insurer to verify coverage before leaving the dealership.

How Temporary Insurance From the Car Dealership Works

If your insurer does not cover new vehicle purchases, or if your state does not allow insurers to cover new vehicles, then you may need to buy temporary car insurance from the dealership.

Generally, here’s how the car dealership’s temporary insurance works:

• The car dealership’s temporary insurance works like an ordinary full coverage policy. It includes all required car insurance coverage in your state, collision coverage, and comprehensive coverage up to the actual cash value of the vehicle.
• The dealership may let you choose the length of time you want temporary insurance to cover. For example, you could buy a policy for one day, one week, or one month.
• Not all dealerships offer temporary car insurance. Some dealerships require you to bring your own insurance to purchase a vehicle and have no other insurance options.
• Some dealerships offer free insurance as an incentive for new vehicle purchases. You could get one week or one month of free insurance in exchange for buying a new vehicle today, for example.

If you do not qualify for the dealership’s temporary insurance, and if you don’t have other proof of insurance, then you cannot leave the dealership with your new vehicle.

How the New Car Insurance Grace Period Works

Some insurers offer a grace period on all new vehicle purchases, giving you a few days of coverage before adding a vehicle to your policy.

Other insurers have no such grace period, requiring you to add a new vehicle to your policy immediately.

Sometimes, your state may prevent insurers from offering a grace period. Some states have insurance laws requiring insurers to offer a grace period – or preventing insurers from offering a grace period.

Contact your insurer to verify how the new vehicle car insurance grace period works in your state and with your specific policy.

Alternatives to Temporary Insurance from the Car Dealership

You may not need to buy temporary insurance from the car dealership. Instead, you could buy your own insurance or rely on your existing policy:

Use Your Existing Policy: Many insurers and states extend a grace period to new vehicles. You can buy a new vehicle, and your existing insurance policy covers that new vehicle for a certain length of time – anywhere between two days and 30 days. Generally, it’s best to contact your insurer before buying a new vehicle to verify coverage. Then, you should alert your insurer as soon as possible after purchasing the new vehicle to avoid a lapse in coverage.

Buy Your Own Temporary, Short-Term Insurance: If you don’t have a current policy and don’t want to buy the dealership’s temporary insurance, you could buy your own temporary insurance. You could buy a six-month insurance policy from a provider in your area, for example. Or, you could buy from an insurer that doesn’t charge a cancellation fee, like GEICO, Allstate, Progressive, or State Farm. You get the coverage you need to drive away from the dealership. Then, you can compare car insurance policies at your own pace.

If you buy the car dealership’s insurance, you’ll need to buy your own insurance eventually. It’s temporary car insurance that may only last 30 days. Compare quotes today to find the best long-term car insurance provider for your unique needs.

Final Word: Contact Your Insurer to Verify Coverage for New Vehicles

Most insurance policies cover new vehicles.

However, some insurers (and some states) do not extend coverage to new vehicles. In this situation, you may need to buy temporary insurance from the car dealership.

Contact your insurer to verify coverage on new vehicles and determine if you need to buy car insurance from the dealership.