How to get car insurance for the first time

Car insurance for first-time buyers

First-time car insurance buyers may see higher rates due to a lack of insurance history and, in many cases, being a younger driver. The first step is to choose your coverage. If you have a loan or lease, you will need full coverage, and if you own your car outright, you can buy liability-only car insurance. However, this option doesn't provide coverage for your car. Liability coverage is a basic coverage that every driver needs to pay for injuries and damage to others in an at-fault accident, and any other coverage required by law in your state.

In almost every state, “everybody has to have liability coverage,” says Robert Passmore, vice president of auto and claims policy with the American Property Casualty Insurance Association. New Hampshire is the only state that doesn't require liability protection.

Loan and lease agreements require you to buy comprehensive and collision coverageCollision coverage helps pay for repairs or replacement of your car if it's damaged in an accident, regardless of who is at fault and is subject to a deductible., which, along with liability and other legal requirements, make up a full coverage policy.

“If you've got a loan on your vehicle, your lender is going to require you to have those kinds of coverages,” Passmore says.

As a first-time car insurance buyer, here's what to consider when buying your first insurance policy.

Determine the type of coverage you need

The type of coverage you need depends on state law and whether you have a loan or lease on your car. Every state except New Hampshire requires liability insuranceLiability insurance covers sums that an insured becomes legally obligated to pay because of bodily injuries or property damage, or financial losses caused to other people., and some states also require personal injury protection, medical payments, and uninsured/underinsured motorist coverage. If you have a loan or lease, you will also need comprehensive and collision coverage to protect your car.

There are several common types of car insurance:

Collision coverage. Covers damages to your car that result from a collision with another car or object.
Comprehensive coverage. Covers damage to your car caused by things other than a collision, such as fire, theft, weather damage or contact with animals.
Liability coverage. Liability coverage is divided into two parts: bodily injury and property damage. Bodily injury liability covers injuries you cause to others. Property damage liability covers damages you cause to someone else’s property.
Uninsured and underinsured motorist coverage. Uninsured motorist insurance covers damages when an uninsured driver hits you. Underinsured motorist insurance covers you if someone hits you but does not have sufficient insurance coverage.
Medical payments coverage and personal injury protection. Covers injuries to you and your passengers regardless of fault.

Minimum car insurance requirements vary by state. Ensure you know what you need to carry before shopping.

The less coverage you purchase, the lower your premiumThe payment required for an insurance policy to remain in force. Auto insurance premiums are quoted for either 6-month or annual policy periods. -- but the less protection.

Collect your personal and vehicle details before contacting the insurance company

Before you start shopping for car insurance, gather your personal and vehicle information. This information includes your driver's license, vehicle identification number (VIN), address where you will keep the vehicle, payment method and your Social Security number. You'll need these things to get accurate quotes and buy a policy.

Whether you shop online, call around or work with an agent, having everything ready makes the process go smoothly and ensures accurate quotes.

Compare car insurance quotes

Before buying your first car insurance policy, get quotes from at least three different insurance companies to ensure that you're getting the best deal. Make sure to request coverage at the same level when you get insurance quotes. You can request quotes individually or using a one-stop quote comparison tool online. Alternately, a local independent agent can help you gather and compare quotes.

Choose an insurance company

To choose an insurance company, consider their coverage options, available discounts, and reputation in the industry before choosing one over another. The cheapest car insurance company isn't always the best choice. Our list of the best car insurance companies is a good place to start; it provides rankings based on rates, our annual customer survey, and third-party sources.

Pay your premium

Once you make your first premium payment, your car insurance will go into effect. You can pay the full term premium upfront, an option that usually offers a discount, or arrange monthly payments. It's a good idea to set up automatic payments to avoid missing a payment; many carriers also offer a discount for automatic payments.

What do you need to get car insurance?

To get car insurance, you'll need your driver's license, the details about the car including the VIN and when you purchased it, ownership information, loan or lease details if applicable, and information on any previous policy where you were listed as a driver (such as a parent's policy). Be prepared to answer questions about your driving record and claims history. You'll also need a payment method, such as a credit or debit card.

Gather this information:

The year, make and model and body style. Sometimes, your car's vehicle information number (VIN) is all that is needed to provide these details.
The date you purchased the vehicle
Miles driven
Information about who owns the vehicle
The address where the vehicle is garaged
The name of your prior insurance carrier and the expiration date of your policy if you’re on another policy, such as a parent’s

How much is car insurance for first-time drivers?

The average car insurance rate for an 18-year-old buying their first solo policy is $7,497 per year for full coverage.

Rates come down a bit after that, but are still expensive for several years. For example, at 20, a driver is still paying, on average, $5,174 annually for full coverage on their own policy, $2,661 above the national average of $2,513 for a 40-year-old driver.

Why is car insurance so expensive for first-time drivers?

First-time drivers pay more for car insurance because they are less experienced and therefore more likely to be in an accident.

Car insurance companies base rates on risk. As a new driver, you are at a much higher risk of an accident, which means the company is more likely to have to pay a claim.

How can first-time drivers save on car insurance?

To get lower car insurance rates as a first-time driver, shop around and compare as many quotes as possible. Ask about discounts, including how you can qualify for reductions for taking a defensive driving course, and apply as many as you can. If you have full coverage, a higher deductible will lower your rates, and in almost every state, good credit means lower premiums.

Shop around for better car insurance rates

Shopping around and gathering multiple quotes is the best way to get the right car insurance policy at the best price. Not all car insurance companies charge the same rates for new drivers; Travelers charges an 18-year-old an average of $4,196 a year, while the same policy at Farmers costs $7,903 a year, a difference of $3,707.

Ask about discounts

Auto insurance companies offer discounts for good grades, bundling policies, taking a defensive driving course and being a safe driver. Ask about these discounts when you request quotes.

Bundle policies. When you purchase more than one type of policy with an insurance company – for example, both an auto policy and a renters or homeowners policy – it’s typical for the insurer to reward you with lower premiums for all your policies. Bundling is one of the biggest discounts you can get -- often 15% or more off your policy.
Good student discount. Young drivers who excel in school often can earn a price break on their policy. For example, those who finish in the top 20% of their class might be eligible for this discount.
Multi-car discount. If you insure more than one car with a single insurer, you might qualify for a substantial discount – perhaps as much as 25%.
Safe driver discount. Driving for a long period without an accident can earn you a price break.
Defensive driving course. Enrolling and completing a defensive driving course can knock 5% or 10% off your costs. Completing this type may also help you remove department of motor vehicle points off your driving record, which can lower your costs even further.
Usage-based insurance. Your driving habits determine the cost of pay-as-you-drive insurance. As part of this program, your insurer monitors your driving habits electronically, and you get lower rates for good driving behavior, such as not speeding or braking too hard.

Increase your deductible

A higher deductible lowers your rates; increasing it from $500 to $1,000 saves an average of $323 a year. It's the easiest way to get lower rates, but it's important to ensure you can afford it if you need to pay it.

Maintain good credit and a clean driving record

Keeping your driving record clean and building a good credit history will ensure you pay lower rates over time. New drivers have yet to prove their driving skills, which is why rates are so high, but avoiding tickets and accidents will ensure your rates go down as you gain experience. And, in most states, your credit can affect your rates, so building and maintaining a good credit history is vital.

FAQ: How to get car insurance for the first time

What insurance company has the cheapest rates?

Travelers is the cheapest company for new, young drivers, with average rates of $4,196 a year at age 18, $3,391 at 19, and $3,029 at age 20. USAA has cheaper rates if you're an eligible military member, veteran or family member. The cheapest rates will vary by location, driver and vehicle.

What other factors should I consider when shopping for car insurance?

When shopping for car insurance, consider the insurer's reputation and how easy it is to work with in addition to the price. You will build a relationship with your insurer over time, earning loyalty discounts in many cases, and possibly buying additional policies, like home insurance, in the future. While you can switch at any time, choose an insurer you trust to be there for you long term.

How long are you considered a new driver for insurance?

Most insurers consider you a new driver for the first three years that you are licensed. Every year that passes will reduce your rates, however, as long as you keep a clean record.

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