There’s nothing quite like the feeling of the first time you settled into the driver’s seat of your very own car. It’s a special moment!
When you drive your parents’ car, their policy covers you. But once you’re the registered owner of a car, things change.
It’s time you go out and buy your own car insurance.
Before you hit the road, let’s take a look at what exactly you’re paying for when it comes to car insurance.
It always helps to know the ins and outs of car insurance, especially if you’re a first-time buyer.
Step one: Where do I even begin?
Getting car insurance can definitely be intimidating. To make the process of getting an auto quote go smoothly have this info handy:
Personal information:
- Driver’s license number
- Date of birth
- Address
- Occupation
- Marital status
- Education level
- Social Security Number
- Insurance record (if you were on your parents’ policy before or have renters insurance)
Vehicle information:
- Vehicle Identification Number (VIN)
- Make, model, and year of your car
- How long you’ve had the car
- Your car’s mileage reading
Providing as many accurate details as possible will give you the most accurate quote.
Step two: How should I get car insurance?
There are several ways you can go about getting car insurance. Each method varies in how long it takes to get car insurance.
You can meet insurance agents in person, talk to them over the phone, fill out questionnaires on websites, or download an app.
If you’re looking to avoid talking to people (don’t worry, you’re not alone!) and for an efficient way to get car insurance, the quickest way is to do it online or through an app.
For some websites and apps, you can go from being uninsured to insured within 15-20 minutes.
Step three: How do I know what kind of car insurance to get?
Car insurance requirements are different in every state.
But the one common thing states require you to have is liability insurance to legally drive on the road.
So what is liability insurance?
This type of coverage pays for injuries and lost wages that you might cause to a driver or their passengers. If you’re deemed at fault in an accident this also covers any damage to the other driver’s car.
Liability insurance does not cover your injuries, lost wages, or damage to your vehicle. But there is insurance you can buy to cover those things, which we’ll cover later on.
When adding liability insurance to your policy, you’ll see the coverage limits written like this: 30/60/25.
This is how liability insurance is broken down using the numbers above:
The first number refers to bodily injury per person. $30,000 is the maximum dollar amount that covers one person that you injured in an accident.
The second number is bodily injury per accident. $60,000 is the maximum dollar amount that pays for any injuries you cause in an accident if more than one person is hurt.
And the third number is property damage per accident. $25,000 is the maximum dollar amount that pays for the damage you cause in an accident. The third number
Step four: How do I figure out how much liability insurance to get?
So you know you need to get liability insurance. But exactly how much of it do you need? You might think it’s okay to go with the baseline of state minimum requirements. It is, after all, what you need to legally drive.
But the state minimum is almost never enough to cover all costs associated with an accident. You want to be properly protected if you get into a serious accident. Paying out of pocket is never fun.
To figure out how much liability insurance to get, add up your assets, investments, and income. You should buy a liability policy that’s proportional to that amount.
Step five: Are there other coverages I should know about?
Purchasing more than the state minimum for liability insurance still won’t be enough to protect you if you get into an accident. But remember, your vehicle and your injuries aren’t covered by this.
Here are some coverages to consider adding to your policy:
Uninsured / underinsured motorist coverage
Uninsured motorist coverage protects you if you’re hurt or your car is damaged in an accident caused by someone driving without insurance.
Underinsured motorist coverage protect you if the other driver doesn’t have enough insurance to take care of the damages.
But you’ll have to pay a deductible for this coverage. The deductible is the amount of a claim you have to pay yourself before your coverage kicks in.
Personal injury protection (PIP) and medical payments (MedPay)
PIP and MedPay are both coverages that pay for medical services for any injuries you get in a car accident. But the difference is that PIP is more comprehensive than MedPay.
PIP covers not only you, but also your immediate relatives and people on the same policy as you. It takes care of any medical, surgical, rehabilitation, and psychiatric care. It will also provide compensation for lost work wages.
On the other hand, MedPay only covers your medical and surgical bills after an accident.
If you already have good health insurance and disability coverage, your first instinct might be to decline PIP or MedPay coverage. But it’s good coverage to have because if you’ve exhausted the limits of PIP, you can then rely on your health insurance to pay for the rest of your medical bills.
And if you don’t have health insurance, you should definitely get PIP or MedPay to help with any medical costs in the event of an accident.
Collision and comprehensive insurance
This type of insurance protects against damage to your car.
Comprehensive insurance protects against damage not from a car accident. That means things like hail, theft, and vandalism.
Collision insurance covers damage against all types of collisions. It protects your vehicle if you hit another car, if you hit a tree, or you damage your car driving over a pothole.
Like uninsured and underinsured, you’ll have to pay a deductible before insurance covers your claim.
Why did this insurance company quote me this rate?
So you’ve been given a quote. How exactly do insurance companies come up with these numbers?
If you’re a young driver, you’ll expect to pay a pretty high premium. Insurance companies see younger drivers as being reckless drivers.
According to the National Highway Traffic Safety Administration, drivers ages 15-20 had the highest representation in speed related fatal crashes compared to other age groups.
You will notice that as you enter your 20s, you will be paying less than what you did as a teen driver. You have more driving experience under your belt, but your premiums can still be pretty pricey.
It’s not just an age thing. If you’re older and getting your first car insurance policy, you’ll be quoted a fairly high rate too. This is because insurance companies like to use driving history as an indicator of how much of a risk you’ll be.
The more driving experience you have, the lower your premium will be.
Driving experience and age aren’t the only things that they take into consideration. Things like location, type of car, gender matter as well.
Wait, will I always be paying high premiums?
The short answer? No. There’s almost always a way for you to lower what you’re currently paying for insurance. Here are some ideas to get you started:
Raise your deductible
This is an immediate solution that could pay off for you. Going with a higher deductible means that you’re on the line for a bigger amount, but your monthly premium will be lower.
But make sure that you have enough money to pay the deductible if you get into an accident.
Keep a clean driving history
Any accidents you get into are recorded into your driving record. And this will cause your rates to go up. Keep a clean driving record by staying alert behind the wheel!
Know the importance of filing claims
Filing claims also affects your rates. The more claims you file (small or big) will cause your premiums to rise.
Drive cautiously to lower the probability of you getting into an accident. And then you won’t have to file a claim!
Shop around
What you’re paying now doesn’t mean you’re locked into that price forever. So take your time getting quotes from a few insurance companies. Every insurer rates drivers differently. So there’s a chance that you’ll get a lower rate from somewhere else.
This isn’t a one time thing either. Getting multiple quotes ensures that you’re never paying too much for car insurance and that you’re getting the best deal that you can without sacrificing coverage.
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