Buying car insurance for the first time can be intimidating. There’s so much information to consider, and you may feel like making the wrong choice will be disastrous. While your first car insurance purchase is a big decision, you don’t have to stress over it.
Read on to learn how car insurance works, tips for first-time buyers and what to do once you’ve selected the policy you want.
How does car insurance work?
Car insurance is a contract between you (the driver) and an insurance company that offers you financial coverage if you’re in a car accident or your car is otherwise damaged or stolen. You pay the insurance company an amount for your policy — known as premiums — and in exchange, your insurer pays for covered expenses up to certain limits. Which expenses your car insurance policy covers depends on the type of policy you choose.
In the event of an accident or other damage to your vehicle, you must file a claim to get your insurance company to cover the associated expenses. You initiate the claims process by contacting the company to inform it about the incident and submitting a claim form. A claims adjuster will then investigate your claim and decide whether your policy covers the damage. If the claim is approved, the insurance company will pay for some or all of the repair bills.
Every state other than New Hampshire requires drivers to have some form of auto insurance. If you are caught driving without car insurance, you may face a fine, license suspension or possibly jail time.
5 helpful tips for first-time car insurance buyers
If you’re unsure of how to shop for car insurance, follow these tips to help the process go as smoothly as possible.
1. Compare auto insurance quotes online
You don’t have to guess how much you’ll have to spend as a first-time car insurance buyer — getting quotes from insurance companies will help you estimate your costs. Previously, you had to use a licensed insurance broker to compare your insurance options, but now you can easily request online quotes from most insurers.
Insurance rates can vary significantly from one company to another, so try to request quotes from at least three insurers to get the best idea of your pricing and coverage options.
If you feel comfortable with the coverage selection and premium price an insurance company provides, you can purchase its policy. Just keep in mind that online quotes are not official offers or guarantees. The final price you pay for your plan may differ from the quote you received online, especially if the insurance company finds things like accidents or tickets in your driving history.
2. Qualify for as many discounts as possible
Car insurance providers offer discounts that can significantly reduce your premiums if you qualify. To lower your car insurance rates, qualifying for as many discounts as possible is a great strategy. These discounts fall into the following categories:
Defensive driving discount
Insurance companies often incentivize you to take defensive driving lessons from certified driving schools by offering discounts. These discounts typically range from 10 to 15% off your premiums.
Defensive driving lessons usually cost between $25 and $50 and only take a few hours to complete, but they can save you over $100 per year on your car insurance. Taking a defensive driving course to qualify for this discount is worthwhile for many first-time car insurance buyers. Plus, you're prepared to protect yourself and your vehicle when traffic requires it.
Young drivers must deal with very high car insurance rates until they turn 25. This is partly because younger drivers have limited driving experience, making it difficult for insurance providers to gauge their driving abilities. Their relative inexperience also means young drivers are statistically more likely to get into car accidents.
One way to reduce your insurance costs during this period is to take advantage of student discounts. Many insurers offer discounts of up to 25% to full-time high school and college students who maintain at least a “B” average on their grades. Typically, you need to be under the age of 24 and provide proof of your academic record to your insurance company to receive this discount.
Safe driver discount
Insurance providers also offer discounts for safe driving. These discounts are typically around 10% off your premiums to reward you for practicing safe habits like driving under the speed limit, staying accident-free and ensuring all passengers wear seatbelts.
The definition of a “good driver” can vary from one insurance company to another, so review the requirements for this discount with each company you’re considering. Some providers require three to five years of a clean driving record to qualify. But even if you don’t qualify when you sign up for your policy, you may be able to apply the discount when you renew if you meet the requirements at that time.
Low mileage discount
If you don’t drive often or far, you may be eligible for a low mileage discount of up to 20% off your premiums. Though not all insurance companies offer low mileage discounts, some provide these discounts to policyholders who drive less than 7,500 miles per year. Your insurance may require you to use driver-monitoring technology to qualify for this discount.
Other types of discounts you may qualify for include:
- Multi-car discount
- Paid-in-full discount
- Autopay discount
- New car discount
- Bundling discount
Each insurance company offers different discounts with unique requirements, so check which discounts you would receive through each insurer.
3. Maintain a clean credit profile
Your credit history can affect the prices you pay for car insurance, so first-time drivers need to maintain clean credit profiles.
Several states including Michigan, Washington, Massachusetts and California limit or prohibit insurance providers from using your credit information to determine your car insurance rates. In other states, though, poor credit can significantly increase your car insurance premiums. Car insurance rates for those with very poor credit are up to 114% higher than for those with excellent credit according to a study published by The Zebra.
4. Avoid lapses in coverage
Lapses in your car insurance coverage occur when you have a registered vehicle but do not have insurance coverage. Insurance companies view lapsed coverage as a risk and may charge you higher rates, especially if the lapse lasts 30 days or more. You also shouldn’t drive during a lapse in car insurance coverage because driving without insurance is illegal.
There are two main reasons why your insurance might lapse — you didn’t pay your insurance premiums or you racked up too many driving infractions and your insurer canceled your coverage. It’s your responsibility to drive safely and pay your premiums when they’re due to avoid lapses in coverage.
5. Understand the claims process
You may eventually need to file a car insurance claim if you are hurt or your vehicle is damaged in a car accident, so it’s essential to understand the claims process. There are some variations in the process based on your state and insurer. Below is a general breakdown:
- Contact your insurance company to report the accident and provide details like the location, time, the drivers’ names and which vehicle was involved.
- File a police report.
- Speak to an adjuster from your insurance company about the accident.
- The insurance adjuster estimates the cost of repairs, creates a report and offers you a payment.
- Receive the payment on your claim.
How to get car insurance for the first time
To purchase car insurance for the first time, follow these steps:
Have all of the required information handy
Have all the necessary information before you request quotes from car insurance companies online, including:
- Driver’s license number
- Vehicle Information Number (VIN)
- Name of the registered owner of your vehicle
- Address on the vehicle registration
- Mileage on your car
- Date you purchased the car
- Previous insurance carrier and expiration date (if applicable)
Know how much coverage you need
A key factor to consider when buying your insurance plan is what level of car insurance you will need. You can choose from two main types of car insurance with different coverage levels — liability coverage and full coverage.
Liability insurance coverage
Most states require drivers to have a minimum amount of liability coverage. Liability-only insurance coverage includes bodily injury liability and property damage liability coverage. These insurance plans will only cover injuries to other people and damage to other vehicles when you’re driving — not damage to your vehicle or injuries suffered by you.
Full insurance coverage
Full coverage car insurance is more expensive than liability-only plans but offers greater protection. When you have full coverage insurance, you have liability coverage plus collision coverage (for damage to your vehicle in a crash) and comprehensive coverage (for damage to your vehicle from other causes like falling trees).
If you want complete protection for your vehicle, you need full coverage rather than liability-only coverage. You may also be required to carry full coverage insurance if you lease or finance a vehicle.
Research the best auto insurers
If you’re switching from your parents’ auto insurance to your own insurance for the first time, don’t assume your parents' insurer is the best choice. It might be, but even if your parents are happy with their car insurance provider, a different insurer might offer first-time drivers better coverage at a more affordable rate.
Research and compare car insurance providers before you choose which plan to buy. Look at each company's plans and read customer reviews for more insight. The best car insurance companies for you will offer plans with the coverage you need at a premium within your budget.
Thoroughly review the policy details
You don’t want any surprises about the contents of your policy after you purchase a car insurance plan. Something like your car insurance claim time limit, for example, determines how long you have to submit a claim after an accident — vital information to know upfront. Make sure to read your policy carefully and raise any questions you have before you buy a car insurance plan.
Purchase your policy
The final step is purchasing your new insurance policy. You can typically pay with a credit or debit card, bank transfer, check or money order. Pay attention to your billing cycle to know when you have to make your next payment.
If you decide that you aren’t happy with your car insurance, know that you can switch companies. However, you may need to pay a fee or penalty for canceling your current policy. Read our guide on how to switch car insurance providers to learn more about the process.
How much does car insurance cost?
Price is a significant consideration for most people purchasing car insurance for the first time, so it’s common to wonder — how much is car insurance? The full coverage car insurance premiums average $1,342 per year across vehicle types, according to AAA. However, you may pay much more or less than this figure as car insurance costs vary widely based on several factors, including:
- The value of your vehicle
- Where you live
- Your driving record
- Your gender
- Your age
- Your car insurance company
- Your coverage level
- The deductible you choose
Your car insurance coverage level is a major determining factor when it comes to insurance costs. The more coverage you purchase, the more expensive your insurance premiums will be.
Keep in mind that your state may impose minimum coverage amounts. New York law, for example, requires you to have at least $10,000 in property damage liability coverage, $25,000 in bodily injury liability coverage and $50,000 in coverage for the death of someone involved in an accident. You can purchase more coverage than your state minimum for a higher price if you want additional protection.
Another factor to remember is the deductible you choose for your policy. The deductible is the amount you must pay out of pocket for covered expenses before your insurance kicks in. Most companies allow you to choose from several deductible options. Lower deductibles generally mean higher premiums. For example, if you choose a $1,000 deductible, expect to pay more in premiums than you would for the same plan with a $2,000 deductible rate.
Request car insurance quotes from several companies you’re considering to get an idea of what you will have to spend on your insurance policy. Each one will provide a customized quote for your specific vehicle and lifestyle.
Finding the best affordable car insurance can be difficult for a first-time buyer, but these tips will make it easier. Remember to explore your options by requesting quotes from multiple insurance providers and understand how much coverage you need.