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CAR INSURANCE INSIGHTS

Buying car insurance for the first time can be expensive, but these tips for first-time insurance buyers can help cut your costs.

Young driver comparing quotes

If you’re a first-time car insurance shopper, you probably have many questions:

  • What type of coverage do I need?
  • How much will it cost me?
  • How can I make sure I’m getting the best deal?

If you’re wondering how to buy car insurance for the first time, we have answers. Read on to discover more car insurance tips for new drivers.

KEY TAKEAWAYS
  • Auto insurance provides financial protection if you get into an accident or your car is damaged or stolen. 
  • Car insurance liability coverage is mandatory in nearly all states and reimburses you for damages you cause to others in an accident.
  • Other types of optional coverage, such as comprehensive and collision, can protect your own vehicle. 
  • Rates for first-time drivers typically are expensive, but there are many ways to save. 
  • Shopping around for multiple quotes is the best way to find the right coverage at a great price. 

Types of car insurance

Shopping for first-time car insurance can be intimidating, but the more you know about insurance, the better equipped you will be to find a great auto insurance policy at the best price.

Car insurance can be broken down into components, each of which protects you from specific types of events. The main car insurance coverages are:

Collision coverage

Collision coverage deals with damages that result from a collision with another car or object or as a result of flipping over your vehicle.

Comprehensive coverage

Comprehensive coverage handles damages other than those caused by collisions, such as fire, falling objects, missiles, explosions, earthquakes, windstorms, hail, vandalism and riots, or contact with animals. This form of coverage also reimburses you if your car is stolen.

Liability coverage

Liability coverage is divided into two parts: bodily injury and property damage.

Bodily injury liability covers damages you or family members listed on your policy cause to someone else. Property damage liability covers damages you cause to someone else’s property.

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 and Virginia are the only states that don’t require liability protection.

Uninsured and underinsured motorist coverage

Uninsured motorist insurance covers damages that occur to you or your vehicle when an uninsured or hit-and-run driver hits you.

Underinsured motorist insurance covers you if someone hits you but does not have insurance coverage sufficient to cover your losses.

Medical payments coverage and personal injury protection

This part of car insurance covers the treatment of injuries to you and your passengers after an accident. It also might cover lost wages and funeral costs.

How to buy car insurance for the first time

There are many things that you need to know for first-time car insurance buyers. Your rates depend on many factors, including your age, where you live, your driving experience, and even your marital status.

You have to choose between getting full coverage – including comprehensive and collision coverage -- or just carrying liability coverage. Comprehensive and collision coverage is a good idea unless you have a vehicle that isn’t worth much and isn’t worth repairing if it’s damaged.

You also need coverage beyond liability insurance if you have a car loan.

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

Also, you have to find a company that suits your needs. Whether you're looking for minimal coverage, want collision and comprehensive protection or would like roadside assistance, there are companies with insurance policies tailored to meet your requirements. Once you've narrowed all these options based on what they offer and their prices, it’s easier to make an informed decision about which one provides the best value for you.

Here's what to consider when buying your first insurance policy whether it's a new car or an old vehicle:

Determine the type of coverage you want

Car insurance is required in almost every state, but the type of coverage you need may vary.

Uninsured motorist and personal injury protection are two types that some states mandate for drivers to purchase as well; these can be combined with liability coverage or other extra coverages if one deems it necessary.

Collect your personal and vehicle details before contacting the insurance company

The next step in getting car insurance for the first time is to gather your personal and vehicle information.

This information includes your driver's license, proof of address and a copy of your vehicle registration. Make copies of that information to have everything ready before calling an insurance agent or visiting their office.

Get car insurance quotes from different insurers

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.

Choose insurance company

It's important to find an insurance company that offers both quality coverage and a reasonable price. You want to consider their coverage options, discounts available, as well as how reputable they are in the industry before choosing one over another.

Buy car insurance

Once you decide what kind of plan is best for your needs, look over all the fine print to know exactly what's covered by this new agreement ahead of making any payments.

What you need to get car insurance

Comparing the offerings of several insurance providers is crucial to success when buying auto insurance for the first time – or at any time.

The best way to get a great rate on your car insurance is to shop around and gather quotes. But before doing so, make sure you have your information handy. Insurers generally want to know information about your vehicle, including:

  • The year, make, 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

The insurer also wants to know information about you, such as your full name, date of birth and driver's license number (with state of issue).

Details of your driving history -- including any history of tickets and accidents, or past periods when your license was suspended -- also are essential in securing accurate quotes.

Decide how much insurance you need

Both the types of car coverage you require and the overall dollar amount of insurance you need will impact how much you pay in insurance premiums.

The less coverage you purchase, the lower your premium -- but the less protection. Factors that influence your insurance rates include the following:

Minimum car insurance requirements differ by state

Minimum car insurance requirements can vary. For example, in Alaska, you must carry $50,000 per person/$100,000 per accident for bodily injury or death, and $25,000 for property damage for liability protection.

By contrast, in Pennsylvania, the limits are just $15,000/$30,000 for bodily injury or death, and $5,000 for property damage.

Some states might require you to carry minimum levels of other forms of coverage – such as uninsured/underinsured motorist coverage – while others do not.

It’s important to remember that carrying minimum amounts of insurance may not be adequate to protect your assets should you be involved in an accident.

Liability coverage

This type of insurance covers damages you or family members listed on your policy cause to someone else. Higher levels of coverage are more costly, but it’s crucial to carry enough insurance to protect you should you be sued for hundreds of thousands – or even millions – of dollars if you severely injure or kill someone in an accident.

Comprehensive and collision coverage

Collision insurance covers damages that result from a collision with another car or object or as a result of flipping over your vehicle. Comprehensive covers damages other than those caused by collisions, as well as theft of your vehicle.

You can skip these forms of coverage to save money, but there is a risk to doing so. If your car is damaged, destroyed or stolen and you don’t have these forms of insurance, your insurance company won’t reimburse you for the damages you suffer.

Personal injury protection (PIP)

Drivers in the 12 states with no-fault laws are required to purchase a minimum level of personal injury protection (PIP) insurance. Generally, if you have good health insurance, you don’t need to buy large amounts of PIP coverage.

Uninsured/underinsured motorist coverage

This type of insurance coverage protects you when you’re hit by a driver who has no insurance, or inadequate levels of insurance to cover your damages. A handful of states require drivers to carry this type of insurance. In other states, the coverage is optional.

MedPay

Medical payments coverage is an optional form of insurance that can pay for medical expenses if you or passengers are injured in a crash. This insurance isn’t available in all states.

If you have health insurance, you may not need this type of coverage. However, medical payments coverage may cover some expenses associated with health insurance, such as deductibles and copays.

How much is car insurance for first-time drivers?

Car insurance can be costly for first-time drivers, particularly if you’re young whether it's your first car or you're driving your parent's vehicle.

The average car insurance rate for a 16-year-old who has his or her own policy is nearly $7,000 a year for full coverage.

Rates come down a bit after that but are still expensive for several years. For example, at 19, a driver is still paying almost $3,560 annually, on average, for full coverage on their own policy -- more than $1,800 higher than the national average -- $1,758 -- for drivers age 30, according to our data.

How first-time drivers can save on car insurance

While such costs can seem intimidating to new drivers, there are ways to lower the premium. While they take a little effort, the work you put in can yield big savings.

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. Using a search engine such as the one at this site is a quick, convenient way to find out your options.

Get discounts

Looking for discounts is one of the most important tips for getting car insurance. Most auto insurance companies offer an array of discounts that can offer significant policy savings. Some of the most popular include:

Bundle policies

When you purchase more than one type of policy with an insurance – 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 experiencing an accident can net you a price break with many insurers. Your price break can grow even larger with some insurers if you agree to let the company electronically monitor your driving habits.

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.

Increase your deductible

Raising your deductible to $500 or $1,000 can save you money on premiums. Typically, the higher you raise your deductible, the more you save. Just make sure you can afford to pay this deductible should you need to make a claim.

Improve your credit score

A higher credit score typically results in lower car insurance premiums in most states. So, boosting your score can save you money.

It's important to note that insurers use credit-based insurance scores -- not your typical credit score -- when setting rates. These scores are based on information in your credit profile.

Also, a handful of states -- including California, Hawaii, Massachusetts and Michigan – limit or don’t allow this practice.

Pay-as-you-drive 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.

Frequently Asked Questions

What insurance company has the cheapest rates?

It’s impossible to name one company with the best insurance for first-time buyers. No one insurance company has the cheapest rates for everyone.

Each insurer has its own unique formula for setting rates. So, the best way to get the cheapest rates is to shop around and compare quotes.

However, a handful of companies offer great rates to first-time, younger drivers. For example, in California, the three most affordable insurers for adding a new 16-year-old driver to an existing policy are:

  • Geico: $1,695
  • State Farm: $1,928
  • Nationwide: $2,857

However, your own family situation may dictate the rate you get. It’s crucial that you shop around to find the lowest costs.

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

When shopping around for an auto insurance company, it’s crucial that you make sure you are “comparing apples to apples” as you accumulate rate quotes, Passmore says.

That means that with each company you approach, you should make sure you are getting a quote for “the same number of vehicles, the same coverages, the same kind of limits that you currently carry.”

Comparing quotes in this way will help you to know which insurer is offering you the best deal.

Why do first-time drivers pay more for car insurance than experienced drivers?

One of the most important factors for setting car insurance rates is the driving experience. There are many other contributing factors, including location and demographic profile. However, insurance companies see experienced drivers as a lower risk for getting involved in an accident and filing an insurance claim.

Therefore, new drivers often pay more than experienced drivers regarding car insurance costs.

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