Car insurance is a requirement in most states. If you plan to buy a new vehicle in the near future, you'll need insurance to purchase, register and drive the car legally. Before you visit the dealership, it is important that you understand the various requirements of insuring a car, especially if you plan to seek financing to pay for the purchase.
Car Insurance Coverage
Drivers have two main insurance options when buying a car. The car owner can get basic liability coverage or full coverage. Basic liability coverage protects other parties that are affected by the driver or owner's negligence, such as property damage in case of an accident. Full coverage car insurance covers the owner of the car as well with both comprehensive and collision protection. For example, the owner's car is repaired or replaced (up to the maximum outlined in the policy) in case of damage or theft in addition to liability coverage for other parties. The minimum coverage required to own a car varies by state.
When Financing
When you buy a car with cash, you can choose between liability or full coverage, as long as it meets your state's minimum requirements. But if you finance your car, your lender will most likely require you to get full coverage on the vehicle. Since you've borrowed the funds for the car, the lending company needs assurance that it can recover the value of the car in case of an accident, theft or property damage.
When the Loan Is Paid
You don't have to keep full coverage on the vehicle for the entire time you own the car. On the day you pay off your loan in full, including any additional fees required by the lender, you own the car outright. The lender sends you the title, and you now have full decision-making power regarding the car. You have the option to get liability-only coverage on the car, or you can keep your full-coverage policy.
Suggestions
If you finance your car, you should find the most affordable insurance coverage possible. One of the most efficient ways of finding a reasonably priced, full-coverage policy is by searching online. Use a car insurance website that allows you to retrieve price quotes from a variety of providers at once. You should also check your driver's record (you can buy one from your local department of motor vehicles office) and clear up any issues before buying and insuring a new car to ensure that you'll get the best quote possible.
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