Just like driving a car for the first time, being a first-time auto insurance buyer can rattle your nerves. But it doesn’t have to.
Armed with knowledge, you can conquer any fears you might have about buying auto insurance for the first time and hit the road with the right kinds of coverage.
5 Tips Every First-Time Auto Insurance Buyer Should Know
- Understand what coverage you need.
- Shop around.
- Ask about discounts.
- Be aware of your circumstances.
- Know the score.
Here are five tips to help guide you through the insurance-buying journey:
1. Understand what coverage you need.
Before you get auto insurance quotes, make sure you know what types of insurance coverage you need. Think of it like buying groceries: Before you head to the store, you should put together a shopping list.
Every state (except New Hampshire and Virginia) requires motorists to buy liability coverage for bodily injury and property damage. Many states also require medical payments coverage/personal injury protection (PIP).
Whether you bought or leased your car, the lender typically requires you to carry minimum levels of coverage. The lender informs you about requirements once you’ve gotten the auto loan or lease.
David Griffin Jr., vice president of The Dowd Agencies, an independent insurance brokerage based in Massachusetts, recommends that a first-time auto insurance buyer gets enough coverage (perhaps beyond what’s required) to protect your finances.
“While each state has minimum coverage limits, they are rarely high enough to cover you in the event of a serious accident, leaving you responsible for all costs above the coverage limits,” Griffin warns.
Ultimately, determining your coverage needs will help you decide your deductibles (the amount you have to pay out of pocket before your insurer pays for damage or injury claims) and will help keep the insurance premium within your monthly budget.
2. Shop around.
This sounds simple enough, but far too many motorists simply go with the first car insurer that they come across. Instead, you should obtain quotes from at least three insurance companies so that you can compare coverage and pricing plans. This strategy can save hundreds of dollars a year on your car insurance premium. Luckily, Major Insurance’s easy comparison tool allows you to shop multiple quotes in one location.
3. Ask about discounts.
Most insurers offer discounts in the range of 10 percent to 30 percent or more if you insure your car as well as your home or apartment with the same company, Griffin says. In industry lingo, this is known as “bundling.”
Other savings that a first-time auto insurance buyer might qualify for include:
- Good student discount
- Good driver discount
- Discount for anti-theft devices installed in your car
- Discount for paying your premium in full for the year or having it automatically deducted from your bank account each month
4. Be aware of your circumstances.
Are you a 21-year-old man with a history of traffic tickets as a first-time auto insurance buyer? Then you could wind up paying a whole lot more for car insurance.
That’s because age, gender and driving history typically play a part in how much you pay for insurance. In the case of the 21-year-old male driver, he’ll usually pay more for auto insurance than a 30-year-old female driver with a clean driving history.
Insurers consider young, male drivers with poor driving records to be riskier. Therefore, they’re more likely to get into an accident and file a claim than an older female with an outstanding driving record, for example.
While you’re stuck with your age, gender and driving history, it’s good to know what goes into setting your auto insurance rate before you shop for a policy. Plus, when it comes to your driving habits, you could change your behavior to prevent higher premiums in the future.
5. Know the score.
In most states, your credit history factors into how much your auto insurance premium will be and whether you’ll even qualify for coverage.
The majority of car insurers use what’s known as a credit-based insurance score if allowed under state law when considering your application for coverage. This score looks at, among other things:
- Your history of making payments on loans and credit cards
- The length of your credit history
- The mix of credit accounts you have
“Insurers argue that the use of credit-based insurance scores is necessary to properly evaluate risk and charge individual policyholders rates that most closely align with their true risk,” according to the National Association of Insurance Commissioners. “They also note not using credit-based insurance scores could result in lower-risk individuals bearing costs from higher-risk individuals.”The association says that states customarily don’t allow credit-based insurance scores to be used as the only reason for increasing rates or for denying, canceling or failing to renew a policy.