Are You Covered When Test Driving a New Car?
Last Updated on September 11, 2020
If you’re test driving a new car, then insurance will cover you in different ways. Yes, some people cause an accident during a test drive, and you need insurance coverage.
Every year, drivers get into accidents or make a claim during a test drive. Sometimes, you crash a car during a private test drive. In other situations, you test drive a car when driving the dealership’s vehicle.
Are you covered when test driving a new car? Will your ordinary car insurance policy extend to cover a test drive? Find out everything you need to know about auto insurance and test driving a new vehicle.
Test Driving a Car at a Dealership
If test driving a car at a dealership, then you will be covered by the dealership’s insurance or by your own insurance policy.
By law, every dealership is required to have insurance on any vehicle it owns. If those vehicles are stolen, damaged in a storm, or damaged during a test drive, then the dealership can make a claim through its insurance policy.
All car dealerships have blanket policies that cover any damage to the vehicle. Even if you have your own insurance policy, the car dealership’s insurance will be the primary coverage in an accident. In other words, the dealership makes a claim through their own insurance policy – you don’t make a claim through your own insurance policy.
What Happens If I Don’t Have Car Insurance?
If you don’t have car insurance, then you can still legally test drive a vehicle and remain covered by car insurance.
In this situation, the car dealership’s insurance policy is still in effect. The car dealership’s policy remains the primary coverage. If you had your own insurance policy, then it would be the secondary coverage, and it would cover any damages beyond the primary policy’s limits. Since you don’t have your own policy, the primary coverage (from the dealership) is the only coverage during the test drive.
However, as mentioned below, having your own policy could cover additional damages that your dealership will not cover.
What Happens If I Have My Own Car Insurance?
If you have your own car insurance during a test drive, then things don’t change. Your dealership’s insurance policy continues to be the primary coverage for the vehicle, and it’s your dealership’s responsibility to cover any damages.
Having your own car insurance policy, however, is generally a good idea. Your dealership’s insurance policy may cover certain damages – but not others. You could be liable for certain expenses that are not covered by the dealership’s policy.
Yes, the dealership can hold you liable for damages – and if you don’t have your own insurance policy, then you could be required to pay out of pocket.
Dealerships Could Force You to Cover Some Damage
Yes, your dealership has insurance on every vehicle you take for a test drive. However, that doesn’t mean your dealership covers everything after an accident.
In certain situations and with certain damages, the dealership will require you to pay for certain damages. There may be certain exclusions, for example, that prevent your dealership from covering certain damages.
Many dealerships exclude coverage based on the cause of the accident. If you damage the vehicle during the test drive while driving recklessly, for example, then you may be held liable for the damage.
Similarly, if you were caught driving under the influence, then you may be held liable as well.
Some dealerships will initially cover the claim under their own insurance policy, then ‘subrogate’ your claim. With subrogation, the dealership’s insurance company contacts your insurance company to recover any damages they paid. The dealership’s insurance may initially cover the claim, but you ultimately cover the claim through your own insurance policy.
Dealership Test Drives and Waivers
Some car dealerships make you sign a waiver before taking a test drive. Based on the terms of this waiver, the policy can apply in different ways.
Some dealerships require you to sign a loaner, test drive, or demo agreement before taking the vehicle for a test drive, for example. This is particularly common if you are taking the vehicle for a lengthy test drive or if the salesperson will not be in the vehicle during the test drive.
When you sign this agreement, you’re accepting liability for any damages caused during that test drive. If you damage the vehicle during a test drive, harm someone else, or damage someone’s property, then you are liable for this damage.
If you sign this waiver, then your own insurance policy will be the primary coverage during the test drive. Your own insurance policy will cover any damages, and the claim will go through your own insurer – not your dealership’s insurance company.
Contact your insurance company or check your policy to verify it covers test drives. Some policies explicitly restrict coverage during test drives, but most policies should cover you during the test drive.
Ask the Dealership About Test Drive Insurance Coverage
Different dealerships have different rules for test drives. Some dealerships have generous insurance coverage and immediately extend coverage to any test drives. Other dealerships are more restrictive, requiring drivers to prove they have insurance before test driving a vehicle.
When in doubt, ask the dealership. Talk to the car salesperson to verify how coverage works. Ask who pays in the event of an accident.
Test Driving a Car with a Private Seller
If you’ve arranged a private vehicle sale, then you can still take the car for a test drive. In this case, insurance can apply in different ways.
Typically, any private vehicle has insurance. The person selling the vehicle should have insurance on that vehicle. This insurance policy covers the vehicle during your test drive. As long as the vehicle has valid insurance, it should be fully covered during the test drive.
Some buyers are extra careful. They require the seller to sign a form verifying the car has valid insurance, for example.
Other Requirements for Test Driving a Vehicle
Dealerships have different requirements for test drives. Some states also have different insurance requirements. For that reason, vehicle test driving requirements vary between situations.
Generally, you must have a valid driver’s license to test drive a vehicle with any dealership in any state.
Some dealerships also require you to provide proof of insurance – or at least provide the name of your insurance company. Other dealerships don’t require any proof of insurance.
Does Insurance Cover a New Vehicle?
Most insurance policies cover a new vehicle you just purchased. If you decide to buy the vehicle after test driving it, for example, then you should be covered under your ordinary policy.
Most insurance policies allow you to (at least) drive your new car from the dealership to your house without changing your policy. Some insurance companies also offer a 2 to 3 week grace period before notifying your insurer.
Generally, however, you’ll need to notify your insurance company as soon as possible after buying a new vehicle. It’s better to confirm coverage now instead of waiting until it’s too late.
Final Word on Insurance for Test Drives
All dealerships insure vehicles under a blanket policy. This blanket policy works as primary coverage during your test drive. Some dealerships require you to sign a waiver, in which case your own insurance policy will function as primary coverage. In most other cases, your insurance functions as secondary coverage during your test drive.
When test driving a private vehicle, meanwhile, your test drive is covered under that vehicle’s insurance policy.
Talk to the dealership or contact your insurance company to verify you have adequate coverage for your test drive.