If you just bought a new car, congratulations! But before you get on the highway and start cruising around town in your new vehicle, make sure to take care of some paperwork first. One thing you will need is insurance coverage, and you might be surprised to learn that your liability limits might be higher after buying a new car.
When you go to buy a car, you usually have an idea in your mind of what kind of coverage you want and at what price. You base this off the value of your old vehicle and comparison shop regarding how much it would cost to insure any given model. Rarely do people give thought to insurance costs after they buy a new car, but it can affect the amount of coverage you need.
Effects a New Car Has on Your Insurance
If you went from having a vehicle worth $5,000 to financing a newer car with a value of $20,000, you would need to buy more coverage. Upgrading your auto can change your liability limits, making it necessary for you to purchase a larger policy. If you keep your old car after buying a new one, the value of the two cars combined will be considered when figuring out what type of plan you need, so you would have to buy more insurance.
The safest option is to keep your old vehicle insured even if you do not use it, and you should also consider purchasing a slightly higher policy than what you originally planned to buy. If your old car is worth more than the new one, it will be necessary for you to boost your liability limits as well as purchase comprehensive and collision coverage.
Factors Insurers Consider When Calculating Your New Car’s Premiums
When an insurance company calculates how much you pay in premiums each month, there are two factors that come into play: liability limits and your driving record.
Liability Limits
Liability coverage pays out if the policyholder is at fault in an accident, and it can cover bodily injury, medical expenses, property damage and personal injuries. The insurer will use several factors to calculate your limits, including age/sex, type of new car you bought and the location where it’s garaged.
Even though liability limits can change after purchasing a new car, it is still possible to get the same type of coverage. You can opt for slightly higher limits or purchase each liability coverage separately.
Driving Record
Your driving record will determine how much you pay in premiums after purchasing a new car. If you have not had any accidents on your record during the past five years and if few tickets have been issued to you, your premium can drop. On the other hand, if you have had several accidents within the last five years or if you’ve received tickets for things like running red lights and speeding, your rates will rise.
Get Quotes From Different Providers Before You Buy a New Car
Before you buy a new car, it’s a good idea to get quotes from several different providers so you can ensure that your coverage is going to be enough for your needs. Auto insurance rates are usually determined by the insurance companies’ risk assessment of both the driver and vehicle being insured.
If your car is worth more than what you’re paying in premiums, then you may want to consider looking for a policy that has higher liability limits. If, however, your new car is worth less than what you are paying in premiums, make sure the income from the policy outweighs the cost of purchasing it.
The best thing to do when figuring insurance rates after buying a new car is to make sure you get several quotes from several different providers and to shop around. If you stay with the same company after purchasing a new car, your rates may increase because of the new car’s increased worth and your personal driving history.
Tips on How to Save Money on New Auto Insurance
The primary tip for saving money on your car insurance premium is to ask for discounts. Many providers offer them, including senior citizen discounts.
If you do not own your car outright, there are ways for you to save money on your premiums as well. Most providers offer discounts if the vehicle is paid off or if it has an alarm system and all of these things can be added quite cheaply at many car dealerships.
Insure where you can save some money and make sure that the coverage is enough for your needs. If you have any questions, be sure to ask your insurance agents before purchasing a new car and receiving higher rates from your provider because of its increase in worth.
The Importance of Getting an Accurate Quote When Buying a New Car
Although most insurance providers will not base your rates on the make and model of your car, they will use these factors when deciding how much they are willing to insure you for. By knowing this ahead of time, it allows people who do not know their way around cars to purchase one that is expected to be “low risk.”
For example, if you are someone who is considering an expensive sports car, your insurance premiums will likely be much higher than that of a minivan or sedan. So if you do not know what type of car to get for its safety features, it is recommended you purchase one that has lower rates. That way, the net cost to your wallet when purchasing a new car will be lower.
Factors to Consider When Buying a New Car
The cost of insuring your new car, the safety features it has and its overall affordability are all important things to take into consideration before you buy any new vehicle. For those who are especially concerned about their insurance rates, make sure you know the market value of your car before purchasing one.
When buying a new auto insurance policy, it is important to remember that there is no such thing as a “standard” policy. Your rates will be different depending on what type of coverage you want and the number of limits you require.
If you are worried that your rates will be too high after purchasing a new car, it’s best to check with your provider for more information before doing so. That way, you can buy the car you want and have the insurance coverage you need. The key is balance: Get the right amount of coverage without paying too much money for it.
It is important to remember that insurance companies do not base your premiums on the type of car you are buying but rather on the worth of the vehicle. You will usually find that more affordable cars have lower rates than luxury cars or sports cars.
