Smart Savings: How to Cut Costs on Car Insurance for Your New or Used Vehicle
According to The Street, Whether you’re buying a vehicle from a dealership or a private seller, obtaining car insurance is a crucial step. Every state, with the exception of New Hampshire, mandates a minimum amount of auto insurance for legal driving on public roads. If you’re financing or leasing your new vehicle, your lender will likely impose additional insurance requirements.
Saving on Car Insurance: Strategies to Consider
To reduce insurance costs for your new car, consider strategies such as bundling policies, increasing your deductible, and seeking out discounts. However, selecting the right vehicle is equally important for savings.
The Impact of Vehicle Choice on Insurance Rates
According to Howard Goldberg, vice president of the customer solutions center at Plymouth Rock Assurance, “the vehicle itself can be a key factor” in determining insurance costs. High-end luxury and sports cars tend to carry higher premiums. For example, the Maserati Quattroporte Trofeo boasts an annual premium of $6,166, making it the most expensive car to insure, while the Honda HR-V is the cheapest, with an annual premium of $1,673.
Even within the same model, variations in features can affect insurance prices. For instance, vehicles equipped with high-tech safety features, such as anti-theft devices, can see premiums decrease by up to 9%.
Understanding Insurance Requirements
Each state has specific minimum liability insurance requirements that drivers must meet. While these amounts vary, they are often insufficient to cover the costs of a major accident if you are at fault.
If you’re financing or leasing a new car, lenders will typically require collision insurance, which covers damage from at-fault accidents, and comprehensive insurance, which protects against non-collision events like theft and weather damage. Additionally, gap insurance may be necessary, covering the difference between the car’s value and the remaining loan balance if the vehicle is totaled.
While collision and comprehensive coverage are not legally required, they are beneficial for protecting your investment. Conversely, if you’ve purchased an older vehicle, full coverage may not be cost-effective, making liability insurance a more prudent choice.
Average Car Insurance Costs in the U.S.
Here’s what you can expect to pay annually for car insurance in the U.S., based on Insure.com averages:
- State minimum liability: $502
- Full coverage (liability, collision, and comprehensive): $1,897
- Gap insurance: 5% to 6% of your comprehensive and collision premium (usually less than $60)
Shop Around for the Best Rates
Once you’ve determined your coverage needs, it’s time to shop for car insurance. Even if an initial offer seems appealing, it’s wise to gather at least three or four quotes from different insurers. By comparing auto insurance quotes, you could save as much as $3,000, according to Insure.com.
Adding Your New Vehicle to Your Insurance Policy
Adding a new vehicle to your insurance policy is typically straightforward and involves providing your insurer with the vehicle identification number (VIN). Most insurers offer a grace period to finalize this process.
Goldberg advises, “In most cases, you are given a few days to transfer (coverage) from one vehicle to another.” While a grace period is beneficial, it’s always better to ensure you have coverage before driving away from the dealership.
Tips for Saving on Car Insurance
Before purchasing a new car, consider which vehicle will meet your needs while remaining affordable to insure. Here are additional tips to help you save on new car insurance:
- Bundle Your Policies: Buying home and auto insurance from the same provider can lead to savings of up to 25%, depending on your insurer.
- Increase Your Deductible: Raising your deductible from $250 to $500 can reduce premiums by about 8%, and increasing it from $500 to $1,000 could lower premiums by nearly 11%. Keep in mind that a higher deductible means you’ll pay more out of pocket when filing a claim.
- Look for Discounts: Insurers often offer various discounts, such as for maintaining a clean driving record, completing a defensive driving course, paying premiums upfront, opting for paperless billing, and military service. Discounts can range from 5% to 25% or more based on eligibility.
By following these guidelines, you can ensure you have the necessary car insurance while maximizing your savings.
