Auto Insurance Basics

Understanding your needs before you buy or lease a car

Auto Insurance Basics
October 1, 2013

Prior to purchasing or leasing your new car, you may have spent an extensive amount of time researching gas mileage, safety specifications, and every other relevant detail to ensure that you select the right car for your lifestyle and/or your family’s needs. But without also understanding your insurance needs and the costs you could be potentially facing, you may find that your new vehicle is actually outside of your budget once you factor in the related costs.

All Things Considered: What Car You Can Really Afford

Discussing your rates and overall insurance needs with your insurance agent is a crucial step when you are looking to buy or lease a new car. Chances are that your insurance rates are not going to remain the same when you add a new car to your policy.

Typically, when the average consumer sets out to purchase or lease a new car, it is an upgrade to his or her previous vehicle. So while your previous policy on your paid-for vehicle fit neatly into your budget, you could find it a jolt to your budget to suddenly need to pay more than double what you paid for your previous coverage. Leasing a car can actually present something of a larger problem with your insurance policy due to the bank’s requirements for specific types of coverage on a leased vehicle.

Walking into the dealership, you are going to be focused on getting all of the features you want from your new vehicle. Perhaps you will initially be focused on selecting the perfect color, and then on getting a monthly payment that fits neatly into your budget. Consider that your monthly payment falls in the $300 range. This might fit perfectly within your budget and allow you to drive the car of your dreams, but once you add the new vehicle to your policy, your premium is going to adjust; this adjustment could lead to you paying significantly more for your premium.

Factors That Impact Your Rate

Prior to stepping foot into any car dealership, there are several things that you need to discuss with your insurance company. It’s important that you provide your insurance agent with as much detail as possible about the vehicles you are interested in. Sports vehicles typically have a premium that is higher than minivans or four-door sedans. The type of vehicle will provide the insurance agent with insight into the type of driving that you will be doing, and thus your risk factors for accidents or theft.

Cars that are often targeted by thieves in your area can also be subjected to an increased premium rate. Your insurance agent can also provide you with tips for getting your premium reduced. As an example, you could invest a little bit more by way of upgrading your vehicle’s security system. A better security system will reduce your risk of car theft, and thus help you to reduce your premium.

Your profession will also impact your insurance rate. If you’ve only carried the minimum state-required coverage in the past, then perhaps you weren’t aware of the potential policy differences you can face based on whether you drive extensively for work reasons, or whether your daily commute is a mere five or ten miles.

The drivers’ ages will also impact your policy. While parents typically expect to see an increase in their premiums when their teenagers start driving, they may not wholly understand that the vehicles their teenagers are driving can have as much of an impact on the premium as their teens’ age.

Your auto insurance premium may also be influenced by your credit score. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.

In conclusion, your insurance coverage should always be a consideration when you are in the market for a new vehicle. Whether you are upgrading to a vehicle that is a better match for your family’s growing needs, or looking for a hot sports car to use on the weekends, your insurance agent can help you to understand the types of rates you will be looking at when you add the new vehicle to your policy.

With rates in hand, and an idea of how you can ensure that your newly purchased or leased vehicle meets your insurance needs as well as how it can fit neatly into your budget, you’ll be a savvy and informed consumer when you step onto the dealership’s lot to make your new vehicle selection.

If you are interested in taking out an auto loan, visit our curated list of top lenders.

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