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Buying a new car: How it impacts your insurance

You’ve found the perfect car, so now it’s time to make sure you find the right coverage to keep it protected. Shopping around for car insurance is an essential, legally-required part of purchasing and operating a new vehicle. Read on to lean more about what to expect when buying insurance for your new car.

What Factors Determine the Price of Car Insurance?

Insurance companies use a lot of information to calculate the cost of insurance. Below are the main factors that an insurance company uses when determining the cost of insurance:

Year: The year of your vehicle does affect your insurance rate. Newer vehicles can sometimes receive a new car discount due to having the latest safety features. Although, be prepared...purchasing a newer car often results in an increased premium due to the higher replacement value. Make: The manufacturer of your car will also affect the cost of your car insurance as some manufacturers, such as those who fall in the luxury category, have significantly higher values. In addition, parts for certain manufacturers can be harder to find which increases the cost of insurance. Model: SE, SEL, GT, are all different versions of the same model. The fancier your vehicle, typically the more expensive it is to insure. Coverage Purchased: Higher coverage limits and lower deductibles will increase the cost of insurance. Determining what coverage you want and what coverage you need is important. If you are struggling with deciding on the right coverage, seek the advice of your agent.

NOTE: Insurance companies have to abide by the state laws in which you live. It means you cannot go lower than your state's minimum limits. Age: Insurance companies use statistical data to determine what age groups are more prone to accidents than others. Driving Record: Insurance companies use your driving record to judge your ability to drive. The amount you pay for car insurance will directly correlate with your driving history including both accidents and traffic violations. Number of Drivers: Adding another driver to your car insurance could affect your price. For instance, when adding a young driver to your policy, your rates will likely go up. Credit Score: Take care of your credit score because many insurance companies use it as a basis for your insurance rate. The better your score the better your insurance rate. Where You Live: If you live in an area with a high claims ratio or high theft rates, your rates will be affected.

Take Advantage of Available Discounts

Most car insurance companies offer a range of discounts that can help you save money. Check to see what discounts yours offers and make sure you’re getting every discount for which you qualify. Typical discounts include:

  • Affiliation discounts for members of participating companies, clubs or associations

  • Good student discounts for drivers who are full-time students and maintain above a certain GPA

  • Driver’s education discounts for completing certain driver’s ed programs, like a defensive driving course

  • Good driver discounts for going a certain number of years without an accident or violation on your record

  • Discounts for going paperless or paying your premium in full instead of monthly

  • Longevity Discount as an extra incentive to keep your business

  • Multi-Car and/or Multi-Policy applies when you bundle coverage for more than one car and/or other coverage such as homeowner's or renter's insurance

  • Vehicle Safety Features for drivers whose cars have anti-lock brakes, electronic stability control (ESC), an anti-theft device or a GPS tracking system that can locate the car if its lost or stolen

Many major car insurance companies also offer usage-based savings programs that track your driving through a smartphone app or other device, and award discounts for safe driving. This could be a good way to save for drivers who are confident in their driving, and who don’t mind sacrificing a little privacy.

Necessary and recommended coverage

As stated above, the legally-required coverage minimum may vary by the state in which you live. If you can afford it, it’s advisable to purchase certain coverages where possible.

Comprehensive: Comprehensive coverage is usually optional if you own your car but may be required if your new vehicle is being financed. This coverage pays for repairs needed due to damage other than collisions. For example, if your car is stolen, vandalized, damaged by bad weather, or you hit a deer.

Collision: Collision insurance pays for repairs to your vehicle after it has been involved in a collision with another car or object. If your vehicle is paid in full, you may not be required to have this coverage. However, if your new vehicle is financed, your lender may require it.

Personal Injury: This coverage insures those injured in an accident to a certain limit. States typically have a minimum requirement for personal injury coverage.

Property Damage: Property damage coverage helps pay to repair damage you cause to another person's vehicle or property. This coverage is required by law in most states. It does not cover damage to your own vehicle. You will need collision coverage to help cover the cost to repair your own vehicle.

Do I Need Additional Coverage?

Sometimes car insurance add-ons are appropriate and advisable. If you have recently purchased a new vehicle or you’d like to bridge the gap between your car’s actual value and the amount you still owe, you may want to look into the following coverages:

New Car Replacement Insurance: When you carry new car replacement insurance, you’ll be covered in case your new vehicle is totaled. The factors that determine whether your vehicle qualifies for this coverage varies depending on the insurance carrier.

Gap Insurance: Gap insurance bridges the gap between the amount you owe on your car and the amount of cash value it carries. This coverage is for those who currently owe more than the car’s worth.

How to transfer insurance to a new car

If you already have an auto insurance policy in place, it’s easy to transfer insurance coverage over to your new vehicle. Simply contact your insurance provider or agent with the new car's VIN number. It's a good idea to ask for a review at this time to be certain you're covered properly.

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