What You Should Know About Getting Your First Auto Insurance Policy


You have your first set of wheels and now it’s time to buy insurance. Before signing on with any insurance company, there are certain factors you should consider.

The Basics of Getting Your First Auto Insurance Policy

According to a May 2016 article in The Balance by personal lines insurance agent Emily Delbridge, you should consider being added into someone else’s existing policy, as this will be most cost-effective.

Auto insurance companies will look at your insurance history to determine whether they want to insure you and how much they will charge for your policy. The riskier you are deemed, the more expensive your insurance premiums will be—and as Delbridge notes, as a first-time car buyer, you will have no prior insurance history. As insurance companies often consider previously uninsured drivers to be high risk, especially teen drivers, you could end up paying a costly monthly premium.

You have your first set of wheels and now it’s time to buy insurance. Before signing on with any insurance company, there are certain factors you should consider.Conversely, being added to an existing car insurance policy, such as a parent’s, will help to keep your monthly payments at low or even no cost. As a driver under someone else’s policy, you can take advantage of certain discounts and benefits that are applied to the policy as it expands to include multiple vehicles.

If you can’t be added to an existing policy, there are ways to go about curbing your costs. Make sure to shop around and compare insurance policies to find the cheapest rate before signing on with any company. If you can swing it, you can also opt to pay the entire insurance policy up-front; many insurance companies offer a discount on the premium if you pay it in full, according to Delbridge.

No matter what insurance company you choose, Delbridge advises first-time auto insurance buyers to start shopping around again after six months of coverage. You’ll have enough prior proof of insurance to show your commitment to continuous coverage and be deemed less of a risk, which can help you achieve a lower rate.

Understanding What You’re Buying and Why

If you are buying your own insurance, it’s important to know what the coverage types are and what they cover, and why you’re buying them.

According to a December 2016 article in Investopedia by contributor Lisa Smith, the primary benefits of auto insurance are protecting your health and your assets (in this case, your vehicle). There are three standard types of coverage within an auto insurance policy—liability, collision and comprehensive coverage. The first covers damage to another person’s property and pays for third-party injuries and death-related claims caused by your vehicle, and is required in almost all states. The second, as it is aptly named, covers damage to your vehicle and is required if you are leasing the vehicle or have taken out a loan, though it is still important to consider even if you own the car. Lastly, comprehensive coverage pays for damage incurred as a result of events like theft, fire or water issues, such as flooding. Minimum coverage rates will vary depending on the state, so it’s important to check with your state while making your decisions.

There are certain additional factors that will determine the rate you’re offered. Your deductible is the amount of money you agree to pay out of pocket before the insurance policy will cover the damage; the higher your deductible is, the lower your monthly payment will be, says Smith.

Age and gender will also impact your insurance rates, with younger drivers and male drivers having higher rates. Even the area you live in helps determine your premium, as the rate of crime in your area is considered in the calculation, reports Smith. The more crime in your area, the more at risk you and your vehicle are deemed, and the more you will pay.

It’s also important to note that although flashy, new sports car would look great in your driveway, the type of vehicle you have will impact your rate. According to Smith, older vehicles, less expensive vehicles and sedans often have lower premiums than sports cars or expensive models.

 

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