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The Beginner's Guide to Car Insurance

Updated on August 7, 2016

Great Tips To Help You Get The Best Auto Insurance Deal Around

If you’re planning on getting auto insurance, you need to shop around. By doing your research and learning all about how things work, you can save a few, if not a few hundred, dollars.

It's easy when you know how, and this article has been written to offer as much information as possible to help you out before choosing your auto insurance plan, whether you're a first-time buyer, or just looking for a better deal than the insurance you already have!

For those of you who are new to the car insurance game, or who may want a refresher, here's a handy video from How to Adult:

Am I Best To Get Covered On My Parents Auto Insurance?

If you are a first time driver, then you probably still have a lot to learn about auto insurance. A common question for new drivers when researching insurance is whether they should look for their own car insurance policy, or be added to their parent's policy. For some new drivers, being added to an existing policy can have some great advantages.

The first thing for new drivers to keep in mind is that it can be difficult to find cheap auto insurance, mainly because they have no track record. This makes it difficult to prove just how great their skills behind the wheel are, and difficult for an insurance company to evaluate risk.

From the insurance company's perspective, younger drivers are higher risk because they tend to be less experienced, more reckless, and often in situations where there can be increased chances of collisions or vehicle damage. For the driver, this translates to higher monthly premiums.

Benefits of Being a "Second Driver"

When you are covered on your parent's insurance as a second driver, you will not be considered as high risk. If you go things alone, you will have a much higher premium than a "preferred" driver, someone that has been driving for a long time and has a clean accident history. Also, unlike more experienced drivers, first-timers do not have a no-claims bonus, which helps to prove to auto insurers that they have not had a past record of accidents, or that they have had to repair a vehicle as the result of an accident.

Another benefit of being added onto an already existing policy is the possibility that you will get a large discount. While the original policy holder might see their rates go up for adding a new driver, the overall cost will probably be lower than if both parties had separate policies.

Getting your own insurance may also require a down payment, usually good for the first two months of coverage. For a young driver who may still be in school, a down payment may be prohibitive. However, when adding a new driver to an existing policy, most auto insurers won’t ask for a down payment, and if they do, it is often considerably lower.

Paperwork can also be much simpler when adding a second driver, versus starting a new policy. The process usually only requires a phone call and some information about the new driver and vehicles on the policy, and the added cost will be billed during the next billing cycle for the policy holder. Easy as pie!

What kind of coverage do I need?

If being added to an existing policy isn't your cup of tea, or if for whatever reason you must go it alone, it's a good idea to get several quotes before settling on the final company that you will choose.

Also, consider your circumstances when searching for car insurance. Can you afford extra coverage options, such as coverage for renting a car while yours is in the shop? Or are you looking for a bare-bones option, with no frills, bells, or whistles?

For drivers with bad driving records, there are some companies that specialize at offering high-risk insurance policies, like Titan.

If you're in the market for more than one type of insurance, say for homeowner or motorcycle companies, then companies like Progressive may be a good fit, since they offer bundled coverage packages that might be a better deal than having different insurance across multiple providers.

Also, remember to use your tools! The internet is loaded with free calculators to help you estimate the costs of auto coverage, and websites like Netquote offer quotes from several companies at the same time, saving you the hassle of having to shop around on your own.

Choose the company (and coverage) that's best for you! If an offer from one company is too much on your wallet, or offers extra features that aren't required or you won't use, don't be afraid to move on to another company. It's a competitive market, and you're the one calling the shots!

For some of the finer points of actually buying insurance, here's another video from Howcast:

Other Tips and Tricks

There are some other options when shopping for car insurance that vary between companies and across state lines. Here are a couple to keep in mind:

Pay for your insurance in full

Sometimes, an insurance company will let you pay the cost of your plan up front and in full. When this is available, it can come with huge discounts, since the insurer won't have to worry about late or missed payments. This can be difficult if you don't have a large enough lump of cash set aside, but potentially worth it if you want to get the most discounts possible.

Six-month trial periods

Another option is to see if your would-be insurance company offers a trial period, typically of around six months. Insurance rates fluctuate, so by going with a trial period, you not only have a way to test out the services offered by one company, but to potentially lock in a better rate at the end of the trial period when the market has changed.

Common Mistakes When Buying Auto Insurance

Of course, there are a lot of mistakes that can be made when looking for cheap auto insurance. Here are some of the most common ones to avoid while shopping for yours:

  • Not shopping around and making comparisons

It seems obvious given how much has already been said about looking for the best rates, but this is one of the most commonly made mistakes, and one that you cannot afford to make. Make sure that you ask agents that are licensed and offer up sound advice. Speak with more than one agent to make sure that you get a feel for the market, and see what others are offering. Also, do your own research beforehand, so you know what you are getting into!

  • Not having a clear understanding of your auto insurance policy and terminology

If you have insurance but have no idea what is offered to you in the policy, you could be flushing away cash without knowing! Understand what full tort or limited tort is. Make sure that you know what uninsured and underinsured motorists means. Learn about first party benefits, and all of the other terms that are thrown out to you when checking about insuring your vehicle. When you know what they mean, you will get the best possible deal that is on offer.

  • Not getting enough auto insurance

If you try to save a few dollars by not purchasing the right amount of insurance, then you can set yourself up for a huge bill later on, usually when you least expect it. You could wind up with an accident and not be fully covered; this isn't just bad for your bank account, but can also leave you to face consequences with the law.

  • Not updating auto insurance coverage

Life changes, like the death of a spouse, a child that leaves the home, a divorce, or a new car can affect your policy. Especially in the wake of tragedy, the responsibility to inform your provider of these changes can be forgotten. It is vital that notify your auto insurer of any changes that may affect your policy, and to do so as soon as possible!

  • Not making the most out of discounts on offer

Insurance companies want as many customers as possible, and to get them, they are always trying to offer discounts. A common tactic is offering discounts for those that have more than one vehicle under the same policy.

Another a great deal to look into is savings for customers that have their home and auto insurance with the same company. There are even discounts for starting your insurance before the effective date!

  • Not selecting a reputable auto insurer

When you purchase auto insurance, the service is the key to having a good experience.

Check out other peoples experience with each companies. Ask friends and family what they think of their insurance providers. Look for reviews of customer service, forums or chat groups about negative experiences with different companies, and check with the Better Business Bureau. If a company wasn't good enough for any of these sources, then it may not be good enough for you!

Where Can I Find Information For My Region?

Did you know that the region that you live in affects the status of your auto insurance? Many people don't consider that where they live can be a huge factor in the rates and types of plans available to them!

If you live in a high risk area, say a bad neighborhood where the statistics for car theft and break-ins are high, your premiums for auto insurance will be high too! But if you live in a quieter, safer area, then your premiums will probably be lower.

Postcodes matter! You will be able to find out estimates for your region online, and it will shock you how any hundreds of dollars difference there can be for living in Miami, Florida, versus Detroit, Michigan!

Highest Car Insurance Rates in the US

Oklahoma, Louisiana, West Virginia, Washington DC, Michigan, Montana, Wyoming and Rhode Island. If you live in any of these states, you can expect to receive higher insurance premiums.

Lowest Car Insurance Rates in the US

Iowa, Maine, Wisconsin, Idaho, South Carolina, Ohio, North Carolina, or Vermont. If you live in any of these states, then you are lucky, because your postcode has hit the jackpot!

What Kind of Car Insurance Buyer Are You?

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Happy Hunting!

Remember, you're buying peace of mind as much as you are paying for benefits, so be always check, check and double-check before signing up for an auto insurance agreement.

No matter what type of driver you are, where you live, or which company you ultimately decide, be sure to keep the points written here in mind while you shop for the best car insurance for your needs!

Good luck, and safe driving!

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