The most important car insurance tips for first-time buyers

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Buying car insurance for the first time can be challenging and costly. There are many insurers to choose from, and you want to make sure you’re doing your best to save money while protecting both yourself and your vehicle.

But it can also be an exciting time. It’s your chance to find a great policy that perfectly fits your unique circumstances.

Here are the top car insurance tips that first-time buyers can use to save money and gain peace of mind.

Know your state’s minimum car insurance requirements.

Most states mandate that drivers carry bodily injury and property damage liability insurance at a bare minimum. Every state has different required liability limits, so make sure you read up on them.

The minimum coverage required by your state, however, may not be enough to provide you adequate financial protection. For instance, you could still be on the hook for large sums of money if you cause an accident and you don’t have collision insurance to cover the repairs. A bare-bones policy might also not provide enough coverage to replace a new car that’s been totaled or pay for severe injuries suffered by other drivers and passengers injured in a crash.

Decide how much coverage you need

The amount of coverage you’ll need will vary based on your age, where you live, vehicle type, miles driven and credit score.

In addition to liability coverage, auto insurance policies also offer a variety of different coverage options as add-ons to the base coverage.

  • Personal injury protection (PIP) covers you (and you passengers) if you sustain injuries in an auto accident. This can potentially cover funeral expenses and lost wages.
  • Uninsured motorist coverage covers you for damages caused by an uninsured or underinsured This also covers you in the case of hit-and-run accidents. Some states require uninsured motorist coverage.
  • Collision insurance covers you for damages to your car, truck or SUV sustained in a collision with another vehicle.
  • Comprehensive insurance covers your car for all damages that are not related to a collision with another vehicle, such as hitting an animal, fire, theft, vandalism and falling objects.

Keep in mind that if you have a sizeable auto loan, you’ll likely be required to purchase enough collision and comprehensive insurance to cover the amount of the loan should you get into an accident.

Shop around for the best fit

First-time buyers might think that all insurers will offer roughly the same coverage and premiums, but that’s not the case. It’s important to shop around for the best and most affordable car insurance policy for your unique circumstances.

It’s possible to find the best cheap auto insurance, but it can take some time. Quotes can differ quite a bit from company to company.

Also make sure to look into factors such as the financial stability of the insurance company, the quality of their customer service, and whether they have an up-to-date insurance license with the state in which you live.

Learn how to get discounts on your premiums

Car insurance will cost you money, but it doesn’t have to break the bank. If you’re a first-time buyer, you might not realize how many different ways there are to reduce your premiums.

Raise your deductible

If you’re willing to take on a bit more risk and pay more out-of-pocket in the event of an accident or damage to your car, you can save big on your premiums. According to the Insurance Information Institute, raising your collision and comprehensive coverage deductible from $200 to $1,000 could reduce your costs by 40 percent or more.

Drop some coverage

If you have an older vehicle or a used car that’s not worth much money, it might not make sense to carry an expensive insurance policy. As a rule of thumb, it’s not worth having collision or comprehensive coverage on a car that’s worth less than 10 times the insurance premiums.

Equip your car with extra safety features

Everyone loses if your car gets stolen, including your insurance company. So, if you install anti-theft devices, such as steering-wheel locks, tire locks and electronic tracking systems, your insurer is likely to offer you a discount. These devices cost money upfront but can quickly pay for themselves.

Drive safely

Auto insurers reward you with lower premiums when you prove that you can drive safely. Some companies offer discounts if you enroll in a defensive driving class. The longer you go without getting into an accident and filing a claim, the larger the discount you can get.

Drive less

Some companies offer discounts to people who drive less than a certain amount of miles. Usually the mileage you have to stay below is 7,000 miles per year. If you can start car pooling, biking, walking or taking public transportation to work, you might be able to lower your premiums.

Pay in yearly installments

Some insurers offer a discount if you pay for an entire year of coverage all at once, rather than paying monthly.

Also, there might be late fees if you get behind on your monthly payments. You can avoid that risk if you pay in a lump sum.

Use paperless billing and auto pay

Paper billing requires the purchase of physical products and postage, and chasing down payments ties up insurance company resources. So, it’s no surprise that some insurers offer discounts if you reduce the amount of paperwork they have to deal with and streamline your payments.

Improve your credit

Car insurance companies use credit as a factor in determining your premiums, so you can lower your costs if you boost your credit score. You can improve your credit if you stay on top of your debt payments, understand how your credit utilization affects your score, be smart with credit cards you apply for, and monitor your credit report for fraud.

Get good grades

If you are a student, you can take advantage of good student discounts. Usually if you maintain a GPA of 3.0 or above you will get a significant discount.

Bundle your policy

Many companies offer a discount if you have multiple insurance policies under the same plan. If you already have home insurance, it could make sense to get a car insurance policy with the same company.

Bottom line

Making smart decisions about your car insurance is all about understanding your options. If you’re a first-time buyer, it’s important to take the time to learn about what an auto insurance policy covers, decide what kind of coverage you need and shop around for the best policy. Doing so will give you the best chance of protecting your vehicle while still saving money on your insurance.

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