When you’re shopping for a new vehicle, don’t get so caught up in all the bells and whistles that you forget about insurance costs. If you’re upgrading from a 10-year-old vehicle to a brand new car, your insurance premium will rise. And you may need additional coverage, especially if you’re financing the car with a loan.
Before you decide on your vehicle purchase, sit down with your insurance broker to discuss potential changes to your policy, premium and deductible so you have a complete understanding of all the costs involved in your new car purchase.
Start with these five questions about the insurance impact of a new car:
- What kind of insurance do I need?
At a minimum, you’ll need liability insurance, which covers repairs or legal fees should you cause an accident. If you’re using a car loan, you’ll be required to purchase full coverage, which includes both collision and comprehensive insurance. Collision covers repairs to your car regardless of who caused the wreck. Comprehensive pays for any non-collision damage, such as fire, theft or a natural disaster.
Other types of insurance include uninsured motorist protection, personal injury protection to cover medical costs or lost wages, and gap coverage to cover a car loan balance should you total the car before it’s paid off.
- What is my deductible?
Most insurance policies have a deducible – the amount you pay before the insurance kicks in. Deductibles can range from $100 to $1,500. Usually the higher your deductible the cheaper your premium (your semi-annual or annual fee). You can talk with your insurance broker about your driving history and habits and whether a higher deductible is right for you.
- Am I eligible for discounts?
Most insurance companies offer discounts or credits, ranging from good student discounts, credits for safety features such as air bags as well as military or senior discounts. Also by bundling your auto and homeowners insurance with one company, you may be eligible for savings. A good insurance broker will be up to date on the available discounts, so you can take advantage of as many as possible.
- What is the claims process?
With insurance companies offering so much online these days, it’s important to understand the claims process as well as the available customer service. Work with your insurance broker to find a company that provides 24-hour service. There’s nothing worse than being in an accident on Friday evening and having to wait until Monday morning to contact the insurance company. A broker – who works with a variety of companies – should have a good sense of which companies have the best service record and which ones process claims quickly and efficiently. No one wants to spend months haggling over an insurance claim.
- How will the kind of vehicle I purchase impact my rates?
Your insurance rates will vary with the make and model of vehicle you choose. For example, Hondas and Jeeps are among the top 10 least expensive cars to insure. On the flip side, the Dodge GT Viper plus various Mercedes and Porsche models are among the most expensive cars to insure. Work with the insurance broker to compare costs based on the vehicle models you’re considering. You still may be able to get something very similar to your dream car, but with a less expensive insurance price tag.