In this article:
Finding your own car insurance for the first time might seem like a daunting task. But it's also an exciting milestone in your life. Before you take out your first auto policy, review these tips to get the best deal.
Understand the Factors That Affect Car Insurance Costs
When getting an auto insurance policy, it's important to understand the different factors insurance companies use to calculate your insurance premium, or the amount you'll pay for your policy. Some of these aspects you have full control over, while others are out of your hands.
Your ZIP code plays a vital role in your car insurance premium. If you live in an area with a statistically higher number of insurance claims, you'll likely pay more than if you live in an area with fewer claims. Additionally, some states have higher state minimum coverage requirements than others, which will also have an effect on your costs.
Your age, gender and marital status can also affect your premium. Statistically, for example, young drivers are more likely than older drivers to file an insurance claim and thus typically pay higher premiums. Even your line of work and whether you own a home can impact premiums.
Your vehicle's year, make and model also have a big impact on your policy premium. The newer the vehicle, the more expensive it is, making the potential amount an insurance company has to pay out in case of a claim proportionally higher. The same goes for high-end or rare vehicles. In case of a car malfunction, finding replacement parts might be harder and more expensive, so your insurer will want to account for that when preparing your policy offer.
Your Insurance Coverage
The amount of coverage you select and which options you choose will affect your insurance premium. Higher coverage limits and more types of coverage can help if you have to file a claim, but they'll also result in a higher premium.
The most basic policy, also called the state-required minimum (in states that require auto insurance), only includes liability insurance, which covers injury and property repair costs for the other party in the event of an accident. Higher liability limits will cover you for higher repair or medical costs. If these expenses exceed your policy limits, however, you may be on the hook to cover the remaining costs.
Car insurance comes with many additional types of coverage you can add on top of liability, such as comprehensive and collision insurance, as well as roadside assistance, gap insurance and more. Be sure you understand all your auto insurance options as you're putting together your policy.
Additional factors car insurers take into account include your vehicle usage, your driving record and claim history, eligibility for discounts and credit score.
Review the Coverage Requirements
When looking for insurance, be sure you know how much coverage you need. Different states require different minimum coverage specifications. Additionally, if you have an auto loan, chances are your lender will require full coverage on the vehicle.
Unlike liability-only insurance, which covers the damage you cause to another person's property, full coverage adds comprehensive and collision coverage so your vehicle will also be repaired if you cause an accident. Collision coverage covers the damage your vehicle experiences when you're behind the wheel, while comprehensive ensures it's protected when it's damaged while parked.
The same coverage requirements apply if your vehicle is leased. Leasing companies also require their vehicles to have full coverage. Before deciding to purchase insurance, be sure to check in with your leasing company or lender. While they all require full coverage, the maximum deductible for full coverage might differ from one company to another.
Compare Multiple Quotes
Once you have a good idea of the types and amount of coverage you want, compare quotes from a range of car insurance companies. Some companies can be more forgiving when it comes to slip-ups on the road, while others may offer more discounts for which you qualify.
You can use an insurance broker to get several insurance quotes. Brokers don't work for a single insurance agency; instead, they help you find a policy and company that fit your needs. Once you decide on a policy, the broker will work with an insurance agent to complete your policy.
Or you can use a service that can instantly gather many quotes based on your preferences. For example, Experian Insurance Services provides insurance quotes from over 40 top insurance companies all in one place, in a matter of minutes.
Look for Car Insurance Discounts
When purchasing an auto policy, it's important to ensure that all the discounts you are eligible for are applied. Insurance companies offer multiple discounts, which can help you save money on your insurance premium. These include:
- Accident-free discount: Grants drivers a discount of up to 20% for not having been involved in any accidents within the past three to five years, depending on the company.
- Violation-free discount: Gives the driver a set discount of up to 15% for traffic violation-free driving over a set number of years.
- Defensive driving course discount: Provides a discount of up to 15% for completing a defensive driving course in a certified driving school.
- Good student discount: Offers a discount of up to 25% for you or any other student member of your household listed on your policy who maintains a certain grade point average.
- Homeowner's discount: If you own a house, you might receive a discount of up to 3% on your auto insurance policy.
- Multi-vehicle discount: If you list more than one vehicle on your policy, chances are, your insurance company will offer a discount of up to 25%, depending on the company.
- Bundling discount: Insurance companies offer discounts if you carry more than one policy with them, such as auto and homeowners policies. Bundling insurance policies can save you anywhere from 5% to 25% on insurance costs.
The Bottom Line
Getting your first insurance policy takes time and research, but knowing your policy matches your needs can ensure peace of mind when you hit the road. If you're not sure which policy or coverage is right for you, contact a licensed insurance specialist who can help walk you through the process.
Your credit score also plays an important role in your insurance costs. Check your free credit report and score with Experian to see where you stand, and make moves to improve your credit if possible before you purchase car insurance.