Tips for Buying Your First Car Insurance Policy

October 10, 2018

Before you can start driving your new car, you need an insurance policy – it’s the law. If you are a young adult, chances are you are considered a ‘high risk’ driver. This means higher premiums. Before you buy the first policy thrown your way, learn what you should look for in a car insurance policy.

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Required Insurance Coverage

First, let’s look at the insurance coverage you have to buy if you want to drive a car. Each state has different requirements, but they basically all want to make sure you have enough coverage to cover people or property you injure. This doesn’t cover any injuries or property damage that you suffer – that is optional coverage in most states.

At a minimum, you’ll need liability coverage for the following:

  • Bodily injury – This covers injuries that other parties suffer as a result of an accident that you caused
  • Property damage – This covers property damage that you cause to other parties’ property, not your own property

At a minimum, you could buy what the state requires and nothing more. But, if you have any type of assets that an injured party could come after should you cause serious damage, you’ll want to increase your coverage to cover your assets.

The state minimums usually cover minor injuries and minor property damage. If the injuries or property damage exceeds the limits of your insurance, you are responsible for the rest. This is why it’s important to determine how much insurance you need so that you don’t find yourself in financial despair.

Option Insurance Coverage

There are several types of optional insurance coverage you may want to consider:

  • Collision insurance – This covers your vehicle in the event that you cause an accident.
  • Comprehensive insurance – This covers your car in any other events other than a car accident. Things like theft, vandalism, and weather issues could be a reason your car is damaged without being involved in an accident.

These coverages are often required if you finance or lease your car. If you own your car outright and it’s ‘older,’ you may want to opt out or minimize this coverage. If your car isn’t worth enough to cover, it may not be worth paying for the premiums.

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Another type of optional car insurance is underinsured and uninsured motorist coverage. These policies protect you should someone else cause a car accident that doesn’t have any or enough insurance. For example, if the driver that caused the accident only had the state minimum liability coverage and your damages exceed those limits, your underinsured policy will kick in and pick up some of the remaining costs.

Read the Fine Print

It’s very important when buying your first insurance policy that you know what you are getting. Ask questions about the:

  • Policy term
  • What is covered
  • Any exclusions
  • When premiums are due
  • How you handle accidents and/or claims

You’ll need to know all of the details to fully understand your policy. For example, some insurance companies allow monthly premium payments to make insurance more affordable. Other companies only accept payments every six months, which means paying a large lump sum at once.

You’ll also want to pay careful attention when the insurance agent talks about what is covered and what is excluded from your policy. If you hear anything that throws up a red flag, ask questions and really evaluate if this is the right policy for you.

Your Premiums May be High

Be prepared because your premiums may be high right from the start. It depends on your age and how long you’ve been driving when you request the policy for your new car. Have you been on your parents’ policy for a while? That will help keep your premiums down, especially if you have a good driving record. If you recently got your license and don’t have a long history of driving, you could expect those premiums to be a lot higher. You’ll have to give it a good 10 years before you see premiums that will be close to the premiums your parents pay.

The type of car you drive also plays a role. The make and model will help the insurance company decide the risks they take insuring the car. The insurance company looks at how often this type of car is stolen, how much it costs to repair it, and its safety rating. Obviously, the less likely it is to get stolen, the less expensive it is to repair, and the higher the safety rating, the lower your premiums will be.

Check out the Deductible

One last thing you should pay careful attention to is the deductible on your policy. This is the amount of money you’ll have to pay first before the insurance will start covering costs of a claim. The higher the deductible that you take, the lower your premiums will be. But, you shouldn’t take a deductible that you can’t comfortably afford.

For example, you could probably get an insurance policy with a $5,000 deductible. Ask yourself if you have $5,000 lying around to pay for damages should something happen. If you don’t, then that deductible isn’t for you. Talk with your insurance agent about the various deductibles available and how they affect the premiums to help you make a decision.

Buying your first car insurance policy is important. Make sure you shop around with a few insurance agents to determine which policy is right for you. This way you can get the policy that you can afford and that will also protect you should you have to make a claim.

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