New Car Insurance Grace Period

Last modified: July 24, 2021

As we go through some things in life, like buying a car, we wish someone who already experienced the whole process could just tell us what to do. If you are purchasing your first car, it doesn’t matter if it’s new or old; you might not be aware of tons of little things. 

Moreover, insuring the car can be a hassle. You might struggle to find answers to many questions like:

  • How long Is the new car insurance grace period? Is it the same for a used vehicle? 
  • Should you buy the car and then tailor insurance to your needs or vice versa? 
  • What is an insurance lapse, and can you avoid it? 

This article will clarify these and many other doubts. 

Do yourself a favor; armor yourself with knowledge before buying a car and save yourself some money. Learn if there is a need for insuring your vehicle, what the car insurance grace period is, and clarify all the terminology, so you can enjoy your new purchase instead of stressing over it. 

What Is a Car Insurance Grace Period?

A car insurance grace period is the length of time you’re allowed to drive your new car before adding it to your insurance. It also refers to the time during which one can delay paying for their car insurance premiums without experiencing a lapse in coverage. Many people mix up this period with a waiting period. The waiting period is the time before the policy coverage goes into effect. It starts right after you purchase the vehicle.

Grace periods vary by insurer and also by the type of coverage. However, not every company provides a grace period for car insurance payments. If you have a car policy, check it out to determine its due date and the grace period, if any. The grace period will usually be clearly defined in your policy, along with penalty regulations for using it. Contact your insurance provider and ask for all these details.

Types of Insurance Grace Periods 

The typical time frame for a grace period is 10 days from the original due date, but it varies from provider to provider. The customer can receive car insurance with a 30-day grace period, which will be the best option since it’s the maximum length, or get just 10 days. What’s more, other providers might offer you as little as 24 hours or not give a grace period at all, which wouldn’t play in your favor if you encountered financial difficulties. So, check out your policy terms beforehand to avoid any disappointment.

What Happens If You Miss a Payment Deadline?

It’s in our nature to procrastinate things, so the question that comes to mind is, what happens if I pay my car insurance late or don’t pay it all? (which we don’t recommend). 

If you miss your premium payment due date, give your insurer a call and let them know about the situation. Even if you have a grace period, don’t count on it. The consequences will depend on how long you’re late with the payment, your company’s policies, and the state laws. Try to deal with the issue as soon as possible to avoid car insurance lapse. 

Now, what happens if you miss the grace period deadline? The coverage will lapse, even if it’s just one day after the deadline. Therefore, if you get into an accident, you will be personally liable for any kind of damage caused. Moreover, it will cost you some additional cash in the future, as the next insurers will consider you a higher risk to insure. 

But this is not the biggest problem; you need to know that driving without coverage could result in legal consequences, fines, license suspension, and so on. So, here lies the answer to “what if you don’t pay car insurance at all” — you will pay other ways for sure.

How Does a Grace Period Work?

If you have a grace period included in your policy, you will have coverage for adverse events, but only for the stated time frame after your due date. If, however, you don’t pay premiums on time during your grace period, the insurance provider will cancel your coverage, and your policy will lapse.

If you miss your payment date, the company will send you a notice of cancellation with the payment due date. In reality, people rarely forget about stuff like this. They are more likely to have financial problems because of which they can’t cover the policy on time. 

We strongly suggest that if you are in this position, call your provider. Usually, the service department can set up an automatic withdrawal or allow you to make small partial payments. 

Should You Buy a Car or Insurance First?

Even though you can buy a vehicle without insurance, it’s better to purchase insurance beforehand so that you can drive your new car off the lot. However, if you already own an auto insurance policy, it will cover your new car. Note that you’ll have to insure your newly purchased car during the grace period.

Let’s look in detail at a few different scenarios explaining insurance of new, used, and financed/leased vehicles.  

How to Insure a New Car 

Scenario 1: you don’t own a vehicle or insurance. In this case, you must first buy insurance so you can drive your car off the lot. Having insurance is the only way to claim possession of your new car. You’ll need some info on your new vehicle; the most important is the VIN or vehicle identification number. Knowing the VIN, you can easily purchase insurance. Try to compare various options and find a suitable policy which will fully cover your needs. If you are buying your new vehicle from a dealership, the representatives can help you find the best coverage for the car on site. Once you choose the car you want, you’ll be able to call an insurer from the dealership to start a policy. 

Scenario 2: you already own a vehicle or an insurance policy. If you own another car, you also own insurance. You can show this insurance to your dealer to claim the possession of the new car. Moreover, the new car insurance grace period will come in handy here since you will have 1-30 days (depending on the policy) to insure your new vehicle. 

How to Insure a Used Car

If you don’t have insurance and want to buy a used car, the rules are identical to a new car scenario. It means you must purchase insurance before you take possession or drive the vehicle. Now, don`t get fooled by the independent sellers who might tell you that you don’t need insurance or not even ask about it. Remember that it’s illegal to drive without financial proof of responsibility or insurance.

However, if you have an insurance policy and want to buy a used car, you’ll just need to add the purchased vehicle to your existing car policy. 

How to Insure Financed or Leased Car

If you’re trying to finance or lease a new car, more rules apply since you are taking a loan. If you don’t own an insurance policy, you should search for the policy that includes collision and comprehensive insurance coverages, strictly required for taking a loan/lease. 

Many people confuse these terms and don’t know what they mean. Collision insurance is a coverage type that covers your expenses or can even replace your car in the event of an accident. On the other hand, comprehensive car insurance is a type of insurance that will pay to replace or repair your car in case it’s stolen or damaged in an incident that is not covered by the collision coverage or the incidents that are out of your control (storm, fire, theft, vandalism). 

If you already have a policy when leasing or financing a car, make sure that it includes collision and comprehensive coverages. 

What Happens to Policy Coverage During the Grace Period?

Living a fast-paced life can surely occupy our mind, and we might forget to pay a bill or two, which can have terrible outcomes, especially if we fail to pay our premium payment for an insurance policy on time. In this case, the grace period will act as a cushion. The coverage guaranteed by our policy will be extended for a certain period established by our provider.

But suppose you’ve forgotten to pay your policy and need to file a claim. This claim should be fully paid out since you are in the grace period. However, after the grace period passes, you will lose all the policy coverage and all the benefits you had with your policy. You might even need to apply for new insurance at higher rates.

What Is the Minimum Grace Period for Monthly Policies?

Many policyholders are unaware of the grace period and whether it is included in their policies. We did research and found out that the typical grace period for a car insurance policy is 10 days from the due date. 

However, you must know that some companies offer as little as 24 hours or no grace period at all. Additionally, there are things in the fine print of your policy that cannot be easily found on the internet and should be better discussed with your provider, for example, questions like:

  • Does a 10day grace period include weekends?

       or 

  • Does the grace period cover me on the due date or until the due date?

Do I Have Insurance When I Drive My New Car off the Lot?

Can you drive a new car without insurance? You must be aware by now that the answer is no. However, suppose you already have a policy that is in effect, meaning you already have a vehicle. In that case, that policy will provide automatic coverage for up to four days in most insurance companies. The coverage will be identical to the one of your existing car. 

Many people think that the car dealership will notify their insurance company about purchasing a new car, but this is solely the customer’s responsibility.

So, do you need insurance to buy a car? Technically, you can buy a car without insurance. However, no matter whether it’s a new or a used vehicle, you’ll need car insurance to drive it off the lot. If you possess an insurance policy, you will be covered the second you drive off the lot. But if you don’t own one, you may end up getting stuck at the dealership. Note that you will violate several laws and regulations even by driving the car just to your house.

Do All Carriers Offer a Car Insurance Grace Period?

Firstly, although not every carrier offers a 30-day grace period, they do provide you with some time before your policy lapses. However, you should not expect that every policy will include it. Check with your insurance provider to know more details about the grace period

Secondly, your new vehicle can’t be added to your existing policy immediately after the purchase. That’s why drivers are offered a grace period to sort it out.

Are There Any Penalties?

If your insurance policy has lapsed or, in other words, is no longer in effect, you won’t have financial protection if you get into an accident. 

Moreover, due to the lapse in coverage, your insurance company might increase your rates. The drivers with a coverage lapse of more than 30 days will have a premium increase of 35%, while those with a coverage lapse of 30 days or less will see an average 8% car insurance rate increase. These numbers show the importance of getting back to your policy as fast as you can. No matter the percentage in your state, the longer you wait before reinstating your insurance policy, the higher your future rates will be.

Additionally, depending on your state, driving an uninsured car can lead to serious lapse fees, fines, or penalties. 

Do Car Dealerships Require Proof of Insurance?

Absolutely. You won’t be able to drive your new car off the lot if you don’t provide insurance. You can set up your insurance prior to picking up the car if you know what vehicle you’re gonna purchase. 

Since driving a new car without insurance is illegal, it would be irresponsible of the dealer to give you the keys and put you and others on the road at a financial risk. That’s one of the main reasons why you need to own insurance.

Conclusion

It doesn’t matter whether you are buying a used or new car; the insurance grace period is of great importance to you since it will provide some extra time to update your policy and save you some cash. Moreover, it will allow you to delay your premium payment without causing the policy to lapse. Don’t forget to buy insurance before purchasing a car, so you can pick up your keys and drive your vehicle off the lot the day of the purchase. 

FAQs

How soon after buying a car do you need insurance?

You need to get an insurance policy before buying a car if it’s your first car. If you already own a policy, you need to add your new car to the existing policy before your grace period ends. While you can purchase the car without an insurance policy, you can’t drive it off the lot without proof of insurance.

Will the dealership notify my insurance company when I buy a new car?

No, you need to notify the insurance company about your purchase since this is solely your responsibility. Depending on your insurance company’s terms, typically, you have four days to do that.

Do you have a 10-day grace period for car insurance?

The grace period is something that is included in your policy’s terms and conditions, and every company establishes how many days it lasts. With some companies, you get as many as 30 days, while with others, just 24 hours. Some providers don’t offer a grace period at all. So, choose your policy wisely, as the grace period will secure you against spending additional cash.

What happens if I pay my car insurance a day late?

Insurance companies have different regulations regarding late payments. Some are so strict that they will cancel your policy and regard it as lapsed a minute after your due date. Others with the grace period will allow you to pay the amount during a certain time frame, usually with a late payment fee. However, you should check with your provider and ask them what’s gonna happen, even if it is a day or two. Moreover, the best thing you can do if you know that you will pay late is to negotiate.

Do I need insurance to buy a car from a private seller?

Since we mentioned many times that driving without insurance is illegal in most states, you always need proof of insurance, no matter who you are buying the car from or if you are driving it home or elsewhere. Make sure to get a new policy if this is your first car purchase. Otherwise, reach out to your existing provider for a policy update.