What you need to know before getting your first car insurance policy
September 15, 2020
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If you’re considering buying your first car, your first car insurance policy should be the next thing on your mind.
Car insurance might seem complicated — there are hundreds of companies that offer policies in each state and many moving parts to the price you’ll pay each month. But, it’s actually quite straightforward once you narrow down what you need in an insurance policy, determine your monthly budget, and start shopping.
There are four things you should do in the process of shopping for car insurance to make sure that you’re getting the best possible deal.
Decide on a level of coverage you’re comfortable with or need
Not all car insurance policies are the same — some come with more protections than others.
Each state has a different amount of minimum coverage required. But, policies can (and often should) come with much more coverage. A state minimum policy often can’t help you replace your car if it’s damaged in an event other than an accident unless you have comprehensive coverage, and may not help if your car is damaged by someone without insurance unless you have uninsured motorist coverage.
As you shop for car insurance coverage, you’ll see a number of different optional coverages and the limits for each type of coverage. If you’re leasing your car or getting a car loan, it’s not uncommon for lenders to require more than the state minimum coverage.
The more coverage types and the higher the limits, the more coverage your insurance policy provides. But policies with more coverage tend to cost more. Decide on the types of coverage you need, and an amount that makes you feel comfortable, meets your needs, and fits your budget.
Determine a deductible that works for your situation
Increasing your deductible — or the amount you’re responsible for paying before insurance covers damages — can help lower your monthly payment. But, it can also mean that you’re responsible for a large bill if you’re in an accident. A high deductible can make an already-stressful situation more stressful, especially if you don’t have the money to cover it.
Choosing your deductible should depend less on your monthly car insurance cost and more on your savings. If you know you won’t have the cash to cover a $2,500 expense if you’re in an accident, having a $2,500 deductible on your car insurance isn’t smart. But someone with a large cash cushion might decide that it’s better to save money each month and rely on that savings if something happens.
Save money by shopping around before choosing a policy
Before you buy a policy, make sure you’ve done your homework. Shopping around for insurance is an important step in the process. Car insurance pricing can vary widely between companies, and it’s worth comparing offers from several companies before buying. An easy place to start is with an insurance company you have a relationship with, or by researching the best car insurance companies in your state.
Car insurance companies use several different pieces of personal information to decide how much each person will pay for coverage. Each car insurance company weighs things like your driving record and experience, your age, and sometimes even gender and credit scores differently. As a result, two companies could charge the same person very different amounts, even for the same coverage.
To start shopping, visit several insurance companies’ websites, enter your information, and gather quotes from five or six insurers. Then, compare the coverage types and limits side-by-side. Generally, the policy that both fits your budget and has the most types of coverage and the highest limits is best.
It could get cheaper if you shop around after 6 months of coverage
If you’re getting your first car insurance policy, prepare to pay a bit more. Your first policy will likely be more expensive than a driver who’s had insurance before, and you can save some money by shopping for car insurance again in six months.
Car insurance companies base insurance prices on factors like your driving history and age, among other factors. Insurance companies also consider whether or not you’ve had insurance consistently for the past six months, and your first policy can be more expensive as a result.
After your first six months of having car insurance continuously, take a few minutes to shop around for car insurance again and save.
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