Owning a car has long been associated with a sense of freedom and endless possibilities. the open road has been romanticized in countless novels, songs, and movies. you can almost imagine turning up the volume on the radio and driving towards a technicolor skyline. the credits roll.
But for all the big adventures you plan to embark on, car ownership comes with some practical advice: With great driving comes great financial responsibility.
Of course, we’re talking about auto insurance. Whether you’re shopping for your first car or your parents say it’s time to get your own policy, finding the right auto insurance can seem like a daunting task. but the journey is not so bad. With a little preparation, you can get a good policy with the right types of coverage at a good price.
how to take out car insurance for the first time
It’s smart to familiarize yourself with the types of auto insurance so you know what you’re buying.
The basic components of an auto insurance policy often include:
- Liability insurance. This pays for damage you cause to someone else’s property, for example if you hit another car or someone’s fence. It also pays for injuries you cause to others in an accident and legal defense costs if you are sued after an accident. it is required in most states. you can choose the minimum required to legally drive in your state or a higher amount. liability insurance does not cover damage to your own car.
- Collision insurance. This coverage pays for damage to your car from an accident, regardless of fault, and also for damage if you hit another object, like a railing. it’s optional unless you finance your car. pays up to the actual cash value of your car in the event your car is totaled. collision insurance comes with a deductible, you choose the amount and if you file a claim it is reduced by this amount.
- comprehensive insurance. this coverage also protects your car, is optional and comes with a deductible. Comprehensive coverage pays for theft and damage due to fire, hail, flood, vandalism, falling objects and animal strikes, for example if you hit a deer. will pay up to the actual cash value of your car if totaled.
- other types of coverage. Depending on the laws of your state, you may be offered or required to purchase additional coverage, such as personal injury protection or uninsured motorist coverage.
- Keep a make and model in mind. In the car-buying process, chances are you’ve identified the types of cars you’re interested in. For example, you want a new Toyota Camry or are interested in trying out a used Honda Civic. an insurance agent can give you quotes for some models, so you can budget accordingly.
- Understand what types of coverage you’ll need. Most states require you to have automobile liability insurance. And if you’re taking out a car loan or lease, your lender or leasing agent will most likely require comprehensive and collision insurance.
- Compare quotes from multiple auto insurance companies. An independent insurance agent or online auto insurance comparison site is an efficient way to compare prices. rates vary considerably between insurers, so you want more than one or two quotes. be sure to compare quotes for the exact same level of coverage to get an apples-to-apples comparison.
- Ask your insurance agent to set up a policy. If you chose the car and know the vehicle identification number (VIN), this part is very easy. you can have your policy ready before you arrive at the dealer. If you don’t already have the VIN, ask if the agent can set up a policy with the information they have, such as the drivers in your household and the address where the vehicle will be stored. once you decide on the car, call the agent with the vin to complete the purchase of the car insurance policy.
- driver’s license numbers for all drivers on the policy
- date of birth of all drivers on the policy
- car garage address (usually your home address)
- vehicle identification number for all vehicles you are insuring
- safe driving courses that you or any of the drivers included in the policy have completed
- qualifications for student drivers (good qualifications may generate a discount)
- an idea of how much liability car insurance you want
- car type
- zip code
- marital status
- education and occupation
- Check. The best way to save money is to compare auto insurance quotes from multiple companies. Auto insurance rates can vary dramatically from one insurer to another. You can get free quotes online or by working with an auto insurance agent. independent insurance agents can provide you with quotes from multiple companies to save you time.
- Get the right amount of coverage. You’ll want to know how much auto insurance you need, and an insurance agent can help you decide on coverage limits. While you don’t want to be underinsured, you don’t want to pay for more coverage than you need.
- Ask about discounts. There are more than a dozen common auto insurance discounts, including multi-policy discounts, new car discounts, and defensive driver discounts.
- Maintain good credit. Most states allow auto insurance companies to use credit as a pricing factor. If you have bad credit, you could pay more, which is why it’s so important to shop around for the best auto insurance rates.
- self-insurance. self-insurance can also be expensive. For example, in New Jersey, if you are required to post a bond, it must be for no less than $300,000 and $10,000 for each additional vehicle (up to $1,000,000).
- post a deposit or bond with the state. Like self-insurance, this can be an expensive option. For example, in California you will need to post $35,000 in cash or a DMV bond, and in Texas you will need to post $55,000 in cash or securities. posting a bond or deposit is not available in all states.
It’s also a good idea to purchase car insurance before you buy a car. Without insurance, you may not be able to get your new car off the dealership lot. you will need proof of insurance before you can take the car home.
Also, it’s smart to budget for the cost of insurance along with your loan payment and vehicle maintenance expenses. While many factors influence what you’ll pay for insurance, the type of vehicle you drive plays a role, so it’s good to get an idea of the most and least expensive cars to insure before closing the deal.
Here’s what you can do ahead of time:
what information do I need?
Before you buy an auto insurance policy, you’ll need to collect some personal information from yourself and any other drivers listed on the policy, including:
You will pay more for car insurance if you buy for the first time
If you’re a new driver and/or shopping for your first auto insurance policy, you can expect to pay more than an experienced driver who’s had insurance for several years. That’s because auto insurance companies look at driving history and insurance history when setting auto insurance rates. the less driving experience you have, the more likely you are to file a car insurance claim.
Inexperienced drivers are often young drivers. The average rate for a 16-year-old driver is around $6,000 to $7,000, for a 20-year-old it’s about $3,200, and for a 25-year-old it’s just under $2,000, according to a Forbes Advisor analysis of rates for a full coverage policy.
Other pricing factors that insurance companies typically look at include:
how much does car insurance cost?
The national average cost for auto insurance with liability, collision, comprehensive, and uninsured motorist insurance is $1,998 for a good driver who purchases $100,000 in bodily injury liability per person, $300,000 per accident, and $100,000 in property damage liability, according to forbes advisor’s analysis.
average cost of auto insurance coverage types
what’s the best way to save money when shopping for auto insurance?
Here are ways a first-time car insurance buyer can save money:
car insurance is a good way to show “financial responsibility”
All states have some type of “financial responsibility” laws, which means that if you own a vehicle, you must show that you can pay others if you cause a car accident. You will need proof that you can pay for car repair bills and other medical expenses.
Most people comply with financial responsibility laws by purchasing auto insurance. It is usually the least expensive and easiest way to drive legally.
You can also purchase types of coverage such as collision and comprehensive insurance to cover your vehicle for damage from auto accidents, auto theft, flood, fire, hail, animal collisions, and falling objects.
Here are two other ways to comply with financial responsibility laws, depending on your state:
your parents’ car insurance may not be the best for you
Your parents may have been insured with the same company for decades, but that doesn’t mean your auto insurance company is the best choice for you. Auto insurance is priced individually, based on several of the pricing factors mentioned above. even if your parents think they get good rates, that may not translate to good rates for you.
The best thing to do is shop around and compare quotes from multiple companies. Here are the best car insurance companies for teens.
Can I buy car insurance at the dealer?
You may be able to purchase auto insurance at the dealer. For example, if you finance your car at the dealership and are required to have comprehensive and collision insurance, the financier may offer you insurance. While this may seem convenient, it’s not a good way to get the best price on auto insurance.
The financier or auto dealer may be limited to working with one or more auto insurance companies. When you shop ahead, you’ll be able to research and compare quotes between several different insurers. getting quotes in advance will save you time and money at the dealership.
Here’s another thing to look out for at the dealership: a differential insurance offer.
If your car is destroyed in an accident, gap insurance pays the difference between the insurance check and what you owe on the car loan. is a good way to help account for vehicle depreciation. but it is often cheaper to buy it from your insurance company than from a dealer.
Differential insurance can cost between $400 and $900 through the dealer or loan company and is often included with the auto loan. If you buy gap insurance through your insurance company, it typically costs 5% to 7% of your premium for comprehensive and collision coverage, which works out to about $15 to $42 a year.
Another advantage of purchasing gap insurance through your insurance company: You can cancel coverage when the value of your vehicle is close to or greater than what you owe on the car loan. if you buy it through the dealer, you’ll have gap insurance until you pay off your loan.