TLTR: This blog explores the topic of car insurance for new drivers. It describes why it’s vital for first-time drivers to insure their vehicles. It also suggests tips that new drivers can use to lower their premiums.
Congratulations! You’ve passed your driving test. All those hours of early morning driving lessons finally paid off. But whether or not you’ve already decided what type of car you want, or are still debating whether to lease or buy, now is the perfect time to also consider your car insurance options.
As a new driver, even though you’ve received your license, it’s completely normal for you to make a few mistakes while driving. But some mistakes can have dire consequences. If you’re uninsured or underinsured, you and/or your family could end up in financial peril.
Having car insurance provides you with the monetary safety net you need if you get into an unforeseen mishap on the road. It can also help pay for any related medical expenses.
To begin with, you should understand the ins and outs of auto insurance and what it covers.
So, let’s look at the basics.
What Is Car Insurance?
Car or auto insurance is an agreement between you and an insurance company. It works to protect you against any potential financial loss caused when your car is in an accident or is stolen.
As long as you continue paying your premiums, the insurance company you’ve bought your policy from will pay for any covered losses that you and your car might face.
Standard car insurance provides coverage for:
Bodily Injury Liability
As a policyholder and a designated driver, if you cause any sort of bodily injury to someone, this coverage will help pay for their medical expenses. It can also help cover any necessary follow-up hospital visits and other related costs.
If the person you hit gets injured and needs to attend months of physical therapy that keeps them from working and earning a living, this coverage in your car insurance policy can help pay their compensation. However, your state’s laws may place limits on the amount of funds that the injured party can receive for lost income.
After the accident occurs, the injured party or their insurance company might decide to take the matter to court. This coverage can also help pay for the legal fees that you might incur.
Medical Payments or Personal Injury Protection (PIP)
Medical pay or Med Pay coverage will cover expenses related to the treatment of injuries to the driver and the passengers of the policyholder’s car.
Personal injury protection coverage can help cover medical expenses and any documented losses like lost wages resulting from the accident. Hopefully it won’t come to this, but it may also cover any funeral costs.
Property Damage Liability
This coverage will pay for any damage you (or someone who’s driving your vehicle with your permission) may cause to someone else’s vehicle or property.
This can include someone’s car, lamp posts, fences, telephone poles, or any part of the building structure.
What Makes You a New Driver?
When it comes to car insurance, insurance providers will generally categorize the following as new drivers:
- Teenagers who’ve received their driver’s license and are still in school
- Adults who started driving later in life
- Immigrants who are new to the country
- Adults who might have a gap in their driving record due to various circumstances.
Do New Drivers Need Car Insurance?
Short answer – Yes! All U.S. states except New Hampshire and Virginia mandate at least basic personal car insurance. According to the National Highway Traffic Administration, car accidents occur every 60 seconds in the U.S. That’s about 5.25 million accidents across the nation, annually!
With stats like these, getting proper insurance should be a priority! Especially if you’re a new driver.
Note: Virginia and New Hampshire are considered at-fault states. This means that the liable party of an accident is financially responsible up to a certain amount for the other party.
Even though these two states don’t mandate car insurance, the vast majority of drivers purchase a policy anyway for the financial protection that it provides to them.
Why Is Car Insurance for First Time Drivers Important?
According to the Centers for Disease Control and Prevention (CDC), the risk of motor vehicle crashes is highest among teens aged 16-19. Teen drivers are also nearly three times as likely as drivers aged 20 or older to get into a fatal crash.
Aside from the fact that young drivers are considered more likely to be careless than older drivers, this shows that first-time drivers are at high risk of road accidents because they simply lack driving experience.
Having car insurance provides you with a financial safety net to fall back on if you damage another vehicle or someone else’s property.
Why is Car Insurance so Expensive for New Drivers?
According to studies by value penguin, first-time drivers pay around $4,529 annually compared to experienced drivers who pay only around $1,427 per year.
When insurance companies set car insurance rates, they look at things like your driving record, insurance history, and how many years of experience you’ve had on the road.
As a new driver, you won’t have much to show for yourself! It also means that you’re not going to be eligible for any no-claims discounts.
When it comes to getting affordable car insurance rates, your level of experience is more important than your age. Car insurance providers know that you don’t grow up to become a safe driver overnight. So, they see young and inexperienced drivers as a financial risk and set higher insurance premiums.
Your driving and claims history can also increase the rate of your car insurance. If you cannot demonstrate that you have a record of safe driving or continuous insurance coverage, your insurance company can choose to set higher premiums.
If you’re a teenager or an immigrant who recently came to the U.S., you might not even have a credit score. Car insurance companies will take all of these factors into account when determining your rate.
How To Receive Car Insurance Quotes for New Drivers?
Finding the right car insurance as a first-time driver can be overwhelming. To get car insurance quotes, you first need to gather some personal information. While some of the requirements may vary, most insurance providers will require the following information and documents:
- Your driver’s license
- Current address
- Date of birth
- Current occupation
- Education level
- Marital status
- Any insurance history
- Driving history
Once you have all these materials ready, you can either take the matter into your own hands and get a quick quote directly from the insurance provider, or you can work with an insurance agent to do so.
Driving history information and current location will significantly influence the cost of insurance for first-time drivers.
Additional information for your vehicle like its make and model, it’s vehicle identification number (VIN), the date of purchase, and details of who it’s registered to will also need to be provided.
How To Get Cheap Car Insurance for New Drivers
It’s important to remember that your car insurance won’t automatically become cheaper when you turn 25.
You’ll need to develop and maintain a good driving record and credit score.
While experience has a massive influence on your rates, here are a few things that you can do to hit a home run for finding the right car insurance:
Shop Around and Compare Coverages
One of the most effective ways to find cheap car insurance that still meets all your needs is by getting several quotes from multiple car insurance companies. This way, you can pinpoint the most affordable car insurance for new drivers.
Get the Right Amount of Coverage
Buying more insurance than one needs is a common occurrence throughout the insurance spectrum. When it comes to finding affordable car insurance, being careful to only choose the coverage that you need can vastly lower your premiums.
If you own an old car, it makes sense to drop collision coverage altogether (unless you’re leasing or are financing a vehicle). Older cars have low repair and replacement costs.
But keep in mind that skipping this coverage will mean you won’t be covered if you get into an accident in which you’re at fault.
Focus On Factors That Influence Insurance Rates
Multiple factors influence the rate of insurance for first-time drivers. While some of them can’t be controlled, other factors like credit score and claims history can. This, in the long run, can help significantly lower your insurance rates.
Having a low credit score will often lead insurance companies to think you’re more likely to file more claims, which can lead to higher premiums. So, maintaining a clean driving record and credit history will help lead to insurance providers charging you less.
Choose the Right Car
If you want to get cheaper car insurance, picking a modestly priced car can get the job done. For example, it will be much cheaper for you to cover a Honda Civic than a Chevy Camaro.
Opting for a second-hand car to start your driving experience can also greatly help lower your premiums.
Look for Discounts
As a new driver, you should check for every type of discount that’s available to you. These tips can help you get significant discounts:
- Insurance companies will often reduce your rates if you choose to bundle your car insurance with other categories of insurance like homeowners insurance.
- If you have multiple cars, choosing to insure them through the same insurance company can also lead to discounts.
- Many insurers provide discounts based on referrals. Find out if that’s the case with the company you’ve chosen.
- Paying your premium in full is seen favorably by insurance companies and might make you eligible to receive discounts.
- Some insurance companies also provide student discounts. See if you’re eligible.
- Eco-friendly vehicles like hybrids or full-electric vehicles are sometimes eligible for discounts.
- Some insurance companies offer discounts based on your profession. This can apply to teachers, police officers, and scientists, for instance.
It never hurts to check and see if your insurance provider offers any discounts that might apply to you.
Consult with an Independent Insurance Agent
You can opt to take matters into your own hands and handle the grunt work all by yourself. But it can come at the cost of considerable time and effort. One of the best ways to ensure that you find the cheapest insurance that meets both your budget and needs is by choosing to work with an independent insurance agent.
An independent insurance agent can assess your situation and will compare quotes from multiple car insurance providers. They can save you a lot of time and can also act as an advisor for any other insurance-related issues that you might face in the future.
Frequently Asked Question
What Will Happen If I Get Caught Without Car Insurance?
If you’re caught without car insurance, you could face license and registration suspensions, heavy fines, and penalties. You might also face jail time.
Make sure that you find an insurance policy ASAP if you drive a car and are currently uninsured. While coverage for new drivers can be somewhat expensive, having a financial safety net will always be worth it.
What Are The Best Car Insurance Companies For New Drivers?
Investopedia conducted a study and concluded that these were the best car insurance companies for new drivers:
Do I Need a Different Car Insurance If I Use It to Make Deliveries?
Deliveries are generally considered a business use and aren’t typically covered under your personal car insurance policy. Make sure that you check with your insurance provider or your insurance agent if you’re making deliveries with your vehicle.
February 9th, 2023
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