Should you purchase auto insurance for a gift car?
Car sales often rise in December as gifting a car during the holidays has become more popular. There is one aspect that is important to remember about giving a car, however, that is easy to forget: auto insurance. The penalties for driving a car without insurance can be steep.
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Justin Wright
Licensed Insurance Agent
Justin Wright has been a licensed insurance broker for over 9 years. After graduating from Southeastern Seminary with a Masters in Philosophy, Justin started his career as a professor, teaching Philosophy and Ethics. Later, Justin obtained both his Property & Casualty license and his Life and Health license and began working for State Farm and Allstate. In 2020, Justin began working as an i...
Licensed Insurance Agent
UPDATED: Sep 5, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
UPDATED: Sep 5, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
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Light vehicles sales in the U.S. increased by 6.4% year-over-year in December 2020, marking numerous times in the past decade that more vehicles have sold in December than any other month.
Slowly, car dealerships and manufacturers have promoted gifting a car for the holidays, a trend that started 20 years ago with Lexus’s “December to Remember” commercial campaign.
There are many things to consider before gifting someone a vehicle during the holidays from the type of car to buy and features to get. One aspect not to overlook is auto insurance.
- Vehicle sales often jump in December as people give cars as gifts
- Most states require a car to be insured before it is driven off the lot
- Taking into account insurance costs on a car gift can lower stress later
Car Insurance Requirements When Gifting a Car
As recent arrests for driving without insurance show, operating a motor vehicle without insurance in almost every state is a crime. And the punishment (up to a $5,000 fine for a first offense) can be steep.
While many people know this already, one specific aspect may take them by surprise. It involves the new car buying process.
If you buy a car from a dealership this holiday — even as a gift — it is illegal to drive it off the lot without insuring the car first. Many dealerships will outright stop you from driving the car off the lot without proof of insurance.
The easiest way to insure your new gift is to call your agent before driving it off the lot and add it to your existing policy.
You can also ask the dealership if the car manufacturer offers free auto insurance on the vehicle, which they sometimes do to entice buyers. Either way, the car insurance will need to meet the state’s minimum insurance laws.
Being aware of those can protect your car for the lowest amount of money while you give the car to your special someone.
Many times the minimum coverage needed is just liability insurance — the type that reimburses the other driver for damages done in an accident. Some states, however, may require additional coverages, especially states with “no-fault auto insurance.”
And some states go a step further and require proof of insurance to transfer the car title.
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Choose the Car Wisely: Auto Insurance Costs Vary by Vehicle
Throughout the excitement of purchasing a vehicle for someone, various experts believe that this type of gift can fall flat on its hood, and part of the reason may be its associated insurance and maintenance costs.
Insurance costs for cars vary a great deal on type, brand, and MSRP. The rule of thumb is that the more expensive a car is and the more costly it would be to repair, the more expensive it will be to insure the car. Some factors to look out for that could increase the insurance cost of a vehicle are:
- High-tech features
- Damage possibility in an accident
- Safety ratings
- Lack of anti-theft technology
- MSRP
- Availability of parts if a repair is needed
- History of mechanical problems
Aside from the vehicle, insurance can also vary by the insurance policy holder’s age, sex, occupation, credit score, driving record, and the ZIP code where the policy holder will store the vehicle.
Taking into account insurance costs and maintenance costs before picking the car to give can make it easier down the road when the person who received the car now has to take financial responsibility for it.
Frequently Asked Questions
What is a gift car?
A gift car refers to a vehicle that is given as a present to someone, typically from a family member, friend, or colleague.
Is it necessary to purchase auto insurance for a gift car?
Yes, it is generally necessary to purchase auto insurance for a gift car. Just like any other vehicle on the road, a gift car needs to be insured to comply with legal requirements and protect against potential financial loss in case of accidents or damages.
What are the legal requirements for auto insurance?
The legal requirements for auto insurance vary from one jurisdiction to another. However, in most places, liability insurance is mandatory, which covers bodily injury and property damage to others in case of an accident that you are found at fault for. It is important to check the specific insurance laws in your area to determine the minimum coverage required.
Can the recipient of a gift car use their existing insurance policy to cover the vehicle?
In some cases, the recipient’s existing insurance policy may provide temporary coverage for the gift car. However, it is advisable to contact the insurance company and inform them about the new vehicle to ensure proper coverage. Depending on the policy terms, the recipient may need to add the gift car to their policy or obtain a separate insurance policy.
What types of insurance coverage should be considered for a gift car?
Besides the mandatory liability insurance, additional coverage options can be beneficial for a gift car. Comprehensive coverage protects against non-collision-related damages such as theft, vandalism, or natural disasters. Collision coverage covers damages from accidents, regardless of fault. Other optional coverage types include uninsured/underinsured motorist coverage, medical payments coverage, and roadside assistance.
How can one find the right auto insurance policy for a gift car?
To find the right auto insurance policy for a gift car, it is recommended to research and compare multiple insurance providers. Obtain quotes from different companies, considering factors such as coverage options, deductibles, premiums, and customer reviews. Consulting with an insurance agent or broker can also help in understanding the specific insurance needs for the gift car and finding the most suitable policy.
Can the cost of insurance for a gift car be reduced?
There are several ways to potentially reduce the cost of insurance for a gift car. Some common strategies include maintaining a clean driving record, opting for higher deductibles, bundling insurance policies (such as combining auto and home insurance), installing anti-theft devices, or taking defensive driving courses. Additionally, inquiring about discounts available through the insurance provider can help lower the premium.
Are there any time limits for purchasing insurance for a gift car?
The specific time limits for purchasing insurance for a gift car may vary depending on the insurance provider and local regulations. However, it is advisable to obtain insurance coverage as soon as possible after receiving the gift car to ensure protection from potential risks or accidents.
What happens if a gift car is not insured?
Driving an uninsured gift car can have serious consequences. If caught driving without insurance, the driver may face legal penalties, fines, and potential license suspension. Additionally, in the event of an accident, the driver may be personally responsible for covering all damages and medical expenses, which can lead to significant financial burden. It is crucial to have proper insurance coverage to avoid these risks.
Can I transfer the insurance policy from the person who gifted me the car?
In most cases, insurance policies are not transferable between individuals. The person who receives the gift car will typically need to obtain their own insurance policy in their name. Contact your insurance provider to discuss the specific details and options available for transferring or obtaining a new policy.
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Enter your ZIP code below to view companies that have cheap auto insurance rates.
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Justin Wright
Licensed Insurance Agent
Justin Wright has been a licensed insurance broker for over 9 years. After graduating from Southeastern Seminary with a Masters in Philosophy, Justin started his career as a professor, teaching Philosophy and Ethics. Later, Justin obtained both his Property & Casualty license and his Life and Health license and began working for State Farm and Allstate. In 2020, Justin began working as an i...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.