When you buy a new car, you purchase based on design, features, and price. Although these factors are important, most people pay much less attention to choosing an insurance policy for their newly purchased car.
In this piece, we will get into how to get the best insurance policy for your new car.
Getting Insurance for your New Car
If you already have a car and an existing insurance policy, you will somewhere between 7 and 30 days before you need to add your newly purchased car to your policy. It’s best to check with your insurance company before you buy your new car.
If this is your first car, you must get an insurance plan before you drive your vehicle from the dealership. This is required by the law.
Here is a checklist to help you get the best insurance policy for your new car:
- Identify the car model you want to buy before you buy it and get a car insurance quote for that yet-to-be-purchased car. This will help you understand how much you will really be paying for this new car as you will be able to run the car type through a free car insurance quote generator which will give you a good idea of how much your insurance policy will cost you every 6 months.
- Get at least 3 car insurance quotes from different insurance companies. All insurance companies rate policies differently. You may be surprised at the range of costs you are looking at from each company.
- Call the insurance company and get the next steps from them.
- Then, buy your car and sign all the paperwork at the dealership.
Factors that Determine the Car Insurance Cost
The insurance cost of a car depends on many factors. The average car insurance cost is $1,472 for a 6-month policy.
Here are some factors that will impact the cost of the insurance policy of your new car.
- Cars that offer a high standard of safety and advanced technology tend to have low insurance costs because these cars are less likely to be involved in an accident.
- Another factor that plays a vital role in determining the insurance cost is the chances of a vehicle getting stolen. For example, although Honda Accord has a high safety standard still insurance costs are high, that is because its stolen rate is the highest. According to the National Insurance Crime Bureau in 2018, around 38,426 Honda Accord got stolen all across the country.
- The insurance cost of sports cars usually tends to be higher. Because the driver is most likely to run this vehicle at high speed and it has a high chance of getting involved in the accident. As compared to a typical sedan car, sports car insurance cost more. Face it, you don’t buy a sports car to drive in the slow lane.
- Electric vehicle’s insurance policies cost more than gas-powered cars because EV costs more, as well as the cost to repair EVs are also expensive in the event you get into an accident.
Car Insurance Options
The below are three types of insurance considerations for your new car:
1. Buying Your First Car
Liability coverage is a legal obligation. You need to include liability coverage on your policy. Liability coverage protects the policyholder if he/she has been involved in an accident and caused any damage to property or hurt someone.
2. New-Car Replacement Insurance
Not every insurance provider offers new-car replacement insurance. So, what exactly is a new-car replacement? The name pretty much says it all, and will will walk you through it.
A car starts losing its value as soon as it hits the road. Car’s value usually starts depreciating by 10% in the initial few months. So if any accident occurs soon after the purchase, the insurer will value the car by deducting the deprecating cost.
On the other hand, by charging extra for new-car replacement insurance, if your car was involved in an accident or got stolen in the initial months of purchase, the insurance company will pay the full price of the vehicle of the same model.
For example, you bought a new car which costs $50,000 and you also purchase new-car replacement insurance. So after the first few months, the value of the car will be depreciated and your car will be valued at $45,000. Unfortunately, you got into an accident and you claim for insurance, in this case, you will get the full amount of what a vehicle of the same model cost, not just $45,000.
3. Gap (Guaranteed Asset Protection) Insurance
Gap insurance is basically an add-on to existing comprehensive coverage. If your car is totaled or stolen in the first year of the purchase, a comprehensive or collision plan will only pay out the value of the vehicle. Whereas it does not cover the car loan or lease, here is where gap insurance plays its part. Gap insurance covers all the remaining costs incurred aside from the actual cost of the vehicle.
For example, you buy a new vehicle with a car loan, and your vehicle is totaled within the first year. Your comprehensive insurance will pay $20,000, the actual value of the car. If you owned $25,000 on your loan or lease, gap insurance will assist here and pay the remaining $5,000 left on your loan.
Things To Keep In Mind Before Purchasing A Car Insurance Policy
At last before choosing any insurance option for your new car make sure to keep these points in your mind:
- Every insurance company has its own packages like some might have fewer years for gap coverage. Be sure to read and understand the terms and conditions completely before buying the policy, It may make a big difference down the road.
- If you don’t purchase new replacement or gap insurance, make sure you have enough savings to pay the lender and make arrangements for another car in case of any unfortunate incident.
- Make sure to cancel your new car replacement coverage after the car has crossed the mileage limit specified by the insurer.
Good luck and enjoy your new ride!