New Car Insurance

Perhaps you have myriad good reasons for buying that a new car, especially if your reliable jalopy outlasted its usefulness. However, before you become caught up in visualizing your new ride, consider the significant impact your new car purchase will have on your car insurance. It does not just affect your premium but other aspects of your car insurance- like the types of coverage you buy and additional features you need, like new car insurance.

When you purchase a new car, several factors that determine your car insurance premium – and the coverage you have – remain unchanged. These include your driving record, claims history and the minimum coverage required – factors that are independent of the vehicle you drive. However, your car insurance portfolio will be affected in the following ways when you buy a new car.

1. Type of coverage you need

Owners of older vehicles can escape with dropping collision and comprehensive insurance, since losses are far less likely to be catastrophic. However, it is far wiser to cover multiple risks for a new car. This is because of the higher cost of a new car and the requirements of a lender (if you used a loan to finance your car purchase). Even your planned use of the new vehicle can influence the type of coverage you should have. Generally, new cars require fully comprehensive coverage or third party and collision coverage. Using the minimum insurance required by law is either not an option or not a prudent one for a new car.

2. GAP/ new car insurance

The higher cost of new cars increases the probability of there being a gap between what you owe on your vehicle and the market value. If you get in an accident, that fact could spell financial trouble for you – some car insurance policies do not cover that. GAP (Guaranteed Auto Protection) insurance may be necessary – particularly for high-priced cars. Once you have new car insurance of GAP coverage, you needn’t worry about the adjusters or valuation method as much – you’re covered! Read this article by Bobbie Sage to discover the particulars about GAP insurance as additional insurance for your new vehicle. Note that some insurers actually offer new car insurance, which covers the features of GAP coverage. For an example of a new car insurance offer, click here.

3. Amount of coverage

The main reason for new cars having higher premiums is their higher market value relative to used cars. That, along with other pertinent details (like your vehicle use and location of use) can increase the amount of coverage you need – even how much liability insurance you need. In addition, repairs for new vehicles likely cost a lot more than used ones; this can raise both the insurance amount you require and the insurance rate as well.

Liability insurance is typically mandatory but some relevant details about your use of your new car or its features can increase your liability insurance need. For instance, if you are going to use the new car frequently and in an area where there is high pedestrian traffic, you should have liability coverage above the minimum required by law. Since you have to pay a premium commensurate with the specific risk, it is not always feasible for you to merely buy the coverage amounts to which you are accustomed with older models or used cars.

4. If your new car is also a new model

When your brand-new ride is also a new model, the insurer would likely base the auto insurance rate for the vehicle primarily on price. Other factors such as claims history and theft-risk, based on relevant statistics, usually affect the premium as well. However, a new model does not have such information available. Only after that model develops its own history would the insurer increase or reduce the insurance rate. If you aren’t purchasing a new model, insurers use a combination of factors to determine the risk of insuring your new car. Read about which cars have a better impact on your car insurance by clicking here.

5. Applicable discounts

Insurers normally apply discounts to auto insurance policies based on anti-theft devices or safety features included. New cars normally have multiple safety and anti-theft features that redound to your benefit in many ways. Anti-lock brakes, parking sensors, air bags, electronic ignition and alarms are some of the features on your new car that can reduce the risk of insuring your vehicle. Once your new car has multiple safety and anti-theft features (or even recovery systems), you can access such discounts, which are 10%-20% on average.

6. Innovative features on new vehicles

New cars usually have new features that can increase the functionality and overall value of the vehicle. However, faster acceleration and the latest stereo system are some features that may boost your insurance rate – not just your car’s value. New features that increase the likelihood of theft, accident or the potential claim amount will increase the insurance rate as well.

7. Inherent features of the new car

Insurers assess attributes of your new vehicle to determine the level of risk. The type of car, its size and color are just a few of the specific criteria that insurers check. They use these to place your car in a certain risk category. For example, sports cars exist in a higher risk category than station wagons, suggesting that a change in the type of car, or even your preferred color when you buy insurance, affects your premium.

How buying a new car affects your car insurance is not only a matter of the insurance premium. You might have to modify or change your entire auto insurance portfolio because of your new acquisition. Knowledge of how your purchase affects your car insurance can even steer you towards making a prudent purchase in the first place.