Purchasing a brand-new car is an exciting experience for most drivers. But before you can officially take ownership, you’ll need to handle logistics, like insuring your vehicle. Car insurance is a legal requirement in almost every state and dealerships will ask for proof of insurance before giving you the keys.
If you’ve purchased your car with an auto loan, you’ll need a full suite of coverages to satisfy lender and state requirements, including collision, comprehensive, liability, and (frequently) uninsured motorist. That’s one of the first steps to buying car insurance for a new car: Know what you need. But we break down all the details and how to get the best deal on car insurance below.
How To Buy Car Insurance for a New Car
Before you head to the car dealership, it’s important to figure out how you will insure your new vehicle. Otherwise, you might not get the keys right away. Here’s a step-by-step overview of how to buy car insurance for a new car.
Reach Out to Your Insurance Company
If you already have a car insurance policy, contact your car insurance company and let them know that you’re purchasing a new vehicle and whether it will be financed. You can get a quote for the vehicle online or over the phone with an agent, so you know how much your premium will change. Make sure you have all the details you need, like the odometer reading, VIN, trim level, and safety features.
Some car insurance policies include a grace period, where new vehicles are automatically insured for a short time. If your policy has a grace period, you don’t have to add the new vehicle to your policy right away, but you should add it as soon as possible.
If you don't already have car insurance, then take a few minutes to get quotes from several car insurance companies. Compare premiums, but also take a look at the coverage limits and discounts each insurer offers.
Choose Your Coverage
During the process of adding your new vehicle to your car insurance policy, you will need to select the coverages you want or those that are required. At a minimum, you’ll need personal liability insurance and/or uninsured/underinsured motorist insurance. If you live in a no-fault state, personal injury protection (PIP) might also be required.
However, the types of insurance required by your state don’t necessarily offer enough coverage for a new car. You may want (and your lender will likely require) collision insurance and comprehensive insurance. You may also want to add roadside assistance to cover the cost of basic repairs, like flat tire changes. And consider adding rental reimbursement if you rely on your vehicle and don’t have a second one at your disposal.
If your vehicle is financed, guaranteed asset protection (gap) insurance is a smart investment. Gap insurance pays the difference between your car’s market value and the amount you owe if the vehicle is totaled, and you have negative equity. Some lenders may require it as well.
Get Proof of Insurance
Once you’ve added your new car to your insurance policy, selected your coverages and deductibles, and completed the purchase, you will need to get your proof of insurance documents.
Many insurance companies allow you to download your insurance ID cards and insurance binder, which can serve as proof of car insurance. You will need to show at least one of these documents to the dealership before you can get the keys. Once you take ownership of the vehicle, make sure to keep a copy of your insurance ID cards in your car (or keep a digital copy on your phone).
Factors Influencing Cost
Car insurance premiums are based on various factors, and the rating factors can differ for each type of coverage. Here are some of the criteria that may impact the cost of common car insurance policies.
Personal Liability Insurance
Personal liability insurance includes bodily injury coverage and property damage coverage, which kicks in when you cause an accident and the other driver gets injured, or their vehicle is damaged. This type of insurance is required for most drivers, but the premium can vary depending on your unique situation.
Car insurance companies look at many factors to calculate personal liability insurance premiums, including your driving record, age, claim history, and credit score. If you have a history of at-fault accidents, or if you’ve filed multiple insurance claims in the past, you might pay a higher rate.
Your location is another factor that impacts the cost of personal liability coverage. Some states have higher minimum coverage requirements than others, which may equate to higher premiums.
Uninsured/Underinsured Motorist Insurance
Uninsured/underinsured motorist insurance is a legal requirement in some states. It provides coverage for hit-and-runs, accidents with uninsured drivers, and collisions with drivers who don’t have enough coverage to pay for your losses.
Some areas have more uninsured drivers than others, even though car insurance is legally required almost everywhere. If there are a lot of uninsured drivers in your area, you might pay higher rates for this type of coverage.
In addition, the coverage limits you choose will affect your rate. The higher your coverage limits are, the more expensive your premium will be.
Collision and comprehensive insurance are part of a full-coverage car insurance policy. Collision insurance pays for your vehicle’s repairs after damage that results from a collision, such as crashing into a traffic pole, guardrail, or another car hitting your car. On the other hand, comprehensive insurance pays for non-collision damage, like fires, floods, and theft.
There are several rating factors that may impact the cost of collision and comprehensive insurance, including your claim history, driving record, the type of car you drive, your coverage limits, and your deductibles.
New Car Insurance Premiums by Company
Car insurance rates will vary depending on the company you work with. Below are several sample insurance quotes from some of the largest car insurance providers.
To collect these car insurance quotes, we used a sample profile of a 30-year-old single female living in Chicago, Illinois, with no recent accidents or traffic violations. The vehicle is a 2019 Honda CR-V LX, driven 12,000 miles annually, with the following coverages:
- $100,000/$300,000 for bodily injury liability coverage
- $50,000 for property damage liability coverage
- $100,000/$300,000 for uninsured motorist bodily injury coverage
- Collision coverage with a $1,000 deductible
- Comprehensive coverage with a $1,000 deductible
When comparing car insurance companies, compare car insurance quotes from several different insurance providers. Every insurer weighs rating factors differently, which means costs can differ for the same types of coverage and coverage limits.
While price is an important consideration, you should also compare policies based on features like coverage types, discounts, and financial strength ratings. Few car insurance policies are created equal, and each one has unique benefits and limitations.
How To Save Money on Car Insurance for a New Car
If you’re wondering, “Is insurance cheaper for new cars,” the answer is usually no. Insuring a new vehicle is typically more expensive than insuring a used vehicle, or a car with a lower value. However, there are ways to get cheaper car insurance. Here are a few suggestions for saving money on your policy:
- Look for discounts: It’s common for car insurance companies to offer discounts. Every insurer offers unique savings, but you can often find discounts for good students, claim-free drivers, bundling your policies, insuring more than one vehicle, and taking a defensive driving course.
- Get multiple quotes: Car insurance rates vary based on the insurer that underwrites your policy. Getting a few quotes for the same type and amount of coverage can help you find the most affordable policy for your situation.
- Choose higher deductibles: Some car insurance policies, like collision and comprehensive insurance, often require a deductible when you have a claim. By choosing a higher deductible, you can lock in a lower monthly payment.
- Pay your premium in full: Many insurance providers offer a small discount on your premium when you pay upfront and in full. You can also find discounts for enrolling in automatic payments.
- Improve your credit score: In most states, insurance companies used credit-based insurance scores. If you’re able to improve your credit score, you could get a lower car insurance rate.
When Should You Get Car Insurance for a New Car?
You should buy car insurance for a new car before you purchase the vehicle. You will need to show the seller proof of insurance before you can legally drive the car home. Some policies automatically cover new vehicles for a short period, but not all plans have this feature.
How Much Is Insurance for a New Car?
The cost of car insurance for a new vehicle depends on a variety of factors. Your location, age, credit score, claim history, and driving record are just a few of the criteria that are used to calculate your premium. Car insurance rates also vary between insurance companies for the same coverage types and coverage limits.
Is Insurance More Expensive for New Cars?
Yes, car insurance is usually more expensive for new vehicles. New cars still have most of their value and are typically more expensive to fix than used vehicles. However, there are ways to save money on auto insurance, like comparing quotes, choosing high deductibles, and paying your premium in full.
Experian. "11 Factors That Determine Your Car Insurance Rates."
Allstate. "Does Your Credit Score Affect Your Car Insurance Rate?"