Test Drive Insurance: Am I Covered?

If you're buying a car, you'll likely want to test drive it first. But what happens if you get into an accident during the test drive? Are you covered by the dealer's insurance, or do you need your own insurance policy? In most cases, you don't need your own insurance to test drive a car at a dealership. Dealerships typically have insurance policies that cover test drives, and they are required by law to insure their cars. This type of policy is called garage liability insurance, and it covers accidents and losses to a dealership's cars during test drives. However, it's important to understand the dealership's test drive policy and insurance coverage before getting behind the wheel.

Dealerships are required by law to insure their cars

This insurance is necessary because it eliminates an extra step in the car-buying process, making it more convenient for the customer. If personal insurance was a requirement, it could deter some first-time buyers, leading to a loss in sales. Dealerships are also incentivized to provide insurance to make the car-buying experience as smooth as possible.

While the dealership's insurance will cover the cost of accidents during a test drive, the dealer might still hold the customer liable for damages. For example, if the accident was caused by reckless driving, the dealership may initially pay to repair the car, but then try to collect from the customer or their insurer. Dealerships may also ask customers to sign a \"loaner/demo\" agreement before a test drive, which outlines the customer's responsibility for any vehicle damages.

It is important to note that insurance coverage may vary between dealerships and states, so it is always a good idea to discuss coverage with the salesperson before a test drive. Additionally, while dealerships are required to maintain overall coverage policies, they are not required to insure each car individually. This means that there may be situations where a car is not covered by the dealership's insurance, and the customer could be held liable.

Garage liability insurance

Before purchasing garage liability insurance, business owners should ensure that it adds to, rather than replaces, their basic business liability coverage. Garage liability insurance typically covers bodily injuries to customers on the business premises, up to the chosen limits of the policy. It also usually includes an employee dishonesty provision for theft or vandalism of a customer's car. For an additional premium, businesses can add coverage for vehicles used in conducting business, such as courtesy vans and parts delivery trucks.

Other protections offered by garage liability insurance can include coverage for damages resulting from faulty parts installed on a client's vehicle or defective products sold by the company. However, it is important to note that garage liability insurance does not cover the policyholder's tools, buildings, personal property, or business property. It also does not provide coverage for vandalism, stolen vehicles, or damage from events like hail.

When it comes to test drives, the insurance policy usually stays with the car. Dealerships are required by law to insure their vehicles, and their insurance should be considered the primary coverage in the event of an accident during a test drive. However, it is essential to discuss insurance coverage with the dealership before taking a test drive, as requirements may vary. While the dealership's insurance will likely cover any accidents or damages, they may still hold the customer liable, especially if the accident was caused by reckless driving.

Dealers might hold you liable for damages

If you get into an accident while test-driving a car, the dealership's insurance will likely cover the cost of repairs and any personal injuries sustained. This is because dealerships are required by law to carry business or fleet insurance for their stock, and this insurance usually stays with the car. This type of policy is called garage liability insurance, and it covers accidents and losses to a dealership's cars during test drives.

However, it's important to note that the dealership might still hold you liable for damages, depending on the circumstances of the accident. If you were at fault due to reckless driving, negligence, or violating traffic rules, the dealer could hold you responsible for the damages. In such cases, the dealership may initially pay to repair the car but could then subrogate and try to collect from you or your insurer. Some dealerships may also ask you to sign a "loaner/demo" agreement or a waiver accepting liability for any damages caused during the test drive.

To avoid any issues, it's advisable to be cautious and mindful when test-driving a car. Familiarize yourself with the vehicle, set up your mirrors, ensure your feet reach the pedals comfortably, and give other cars ample space. Additionally, be sure to check with the dealership about their insurance coverage and understand your responsibilities before taking the car for a test drive.

While dealerships typically have insurance that covers test drives, there may be variations in coverage depending on the dealership and the state. It is always a good idea to have your own car insurance policy, as it can provide additional protection in case of an accident.

Test drive requirements vary by dealership and state

When it comes to test-driving a car, the requirements can vary depending on the dealership and the state in which you reside. While the specific rules may differ, the overarching principle is that the dealership's insurance covers any accidents or damages that occur during the test drive. This is because dealerships are legally required to insure their inventory, and this insurance policy typically follows the car. Here's a more detailed look at how test drive requirements can vary:

Dealership Requirements:

Different dealerships may have their own unique procedures for test drives. Some dealerships may only require a valid driver's license, while others may ask to make a copy of your license or even have you sign forms with driving terms and restrictions. Some dealerships might also ask you to sign a "loaner/demo" agreement before allowing you to test drive the vehicle. Additionally, certain dealerships may have specific age requirements, with some mandating a minimum age of 21, while others allow 18- to 20-year-olds to test drive when accompanied by a parent or guardian. It is always a good idea to call ahead and inquire about any specific requirements or restrictions the dealership may have.

State Requirements:

The requirements for test drives can also vary by state. For example, in some states, a driving permit may be sufficient to test drive a car, as long as you are accompanied by a licensed driver who meets the age requirements. Additionally, the type of insurance coverage needed may differ depending on the state. While most dealerships have blanket insurance policies that cover test drives, it is important to understand your state's specific regulations. You can check with your state's DMV or consult with an insurance agent to clarify any questions or concerns you may have about the test drive requirements in your state.

Insurance Considerations:

While the dealership's insurance typically covers test drives, it is important to understand the nuances. In the event of an accident, the dealership's insurance will likely cover the damages, but they may still hold you liable if your actions are deemed negligent, such as reckless driving or disregarding traffic laws. In such cases, the dealership may seek to recoup repair costs from you or your insurance provider. Therefore, it is advisable to exercise caution and drive with care during a test drive. Additionally, if you plan to purchase the vehicle, you will need to provide proof of insurance to the dealer, ensuring that your policy meets the necessary coverage requirements.

Test Drive Experience:

The test drive experience can also vary by dealership and state. Some dealerships may have a predetermined route for you to follow, while others may allow you to choose your path to experience the car in different conditions. The duration of the test drive can also differ, with standard drives ranging from 15 to 30 minutes, while some dealerships offer extended or overnight test drives if you are seriously considering buying the car. It is always a good idea to ask the salesperson if you have specific requests or need more time to make an informed decision.

Non-owner car insurance policies

If you don't own a car but drive regularly, you may want to consider a non-owner car insurance policy. This type of policy provides liability coverage for bodily injury and property damage resulting from an accident for which you are at fault. It does not cover damage to the vehicle you are driving or your own injuries. Non-owner insurance policies tend to be less expensive than standard car insurance policies.

Non-owner car insurance is ideal for those who borrow cars often, use car-sharing services, or rent cars frequently. It can provide additional liability coverage beyond what a car-sharing service or rental company offers. It is also a good option if you need to drive a company car for personal use, as you are typically only covered under the company's auto policy when using the vehicle for work.

When purchasing a non-owner insurance policy, you may be able to select higher liability limits than the minimum required in your state. You can also add uninsured/underinsured motorist protection, which covers your injuries if you are in an accident caused by a driver without sufficient insurance. Personal injury protection can also be added to cover your injuries regardless of fault. However, non-owner policies do not include collision or comprehensive insurance, so they will not cover damage to the vehicle you are driving.

Not all insurance companies offer non-owner insurance, so you will need to research insurers that provide this type of policy. You may be able to obtain a quote online, over the phone, or through a local agent, and you may need to provide personal information such as your name, address, and Social Security number.

Frequently asked questions