New drivers have a lot to learn when it comes to following traffic laws, practicing vehicle safety measures and good driving habits, and complying with your state’s regulations.
One of the most significant responsibilities that every driver needs to fulfill is to purchase an auto insurance policy. The requirements for coverage vary by your state of residence, so understand the laws before you make your selection. Choosing the right insurance policy doesn’t have to be complicated when you know what to look for. Find out more about coverage levels and how to get the lowest rate possible as a new driver.
What Is Auto Insurance?
Auto insurance is coverage that you purchase to insure your car, truck, motorcycle, and other vehicles that travel on the road. The primary function of auto insurance is to give you financial protection if you are involved in an accident. Insurance policies can pay for damages to a vehicle or property, as well as bodily injury. They may even help pay for legal fees if you must go to court over an accident.
You can see why car insurance is so important. Without it, you are personally financially liable for a host of potential damages that you may be unable to pay or that could put a significant strain on your finances.
Most states mandate some level of auto insurance by law. Your insurer should know the exact specifications you must meet, but it’s always a good idea to do some research, so you understand what is needed.
Once you select the amount of insurance and types of coverage you want, you will pay the insurance company an agreed-upon premium. In exchange, your insurance company agrees to pay for all the losses detailed in your policy agreement.
Who Is Considered a New Driver?
New drivers are not just teenagers who reach the set age to obtain a driver’s license for the first time. This can also refer to someone of any age who lacks driving experience and driving history or has a lengthy gap in their insurance or driving history. This is common for adults who spend most of their time living in cities where public transportation is widely available and having a car isn’t a necessity.
Immigrants just entering the United States make up another subset of new drivers. Auto insurers only review domestic driving records when calculating policy premiums, so even someone with a stellar driving record in their home country is considered inexperienced. As a result, it can be more difficult for immigrants to obtain the necessary car insurance. This is because it takes time to go through the proper channels and get a driver’s license and the required paperwork.
In some states, an undocumented immigrant can get a driver’s license by submitting a birth certificate, valid passport, or proof of residency.
What Affects the Price of an Auto Insurance Policy?
Many factors affect the price of your auto insurance policy. These include:
- Age
- Gender
- Marital status
- Location
- Make and model of your vehicle
- Mileage
- Credit score and history
- Driving record
- State requirements
- Coverage limits
Your age and past driving record feature heavily in determining your premium cost. This is because they are used to indicate the risk you will be involved in an accident.
How Much Does Auto Insurance Cost for a New Driver?
Car insurance for new drivers can cost hundreds of dollars more than an experienced driver pays. The exact amount varies significantly by company. This is why it’s so important to shop around before you purchase your policy. Other factors, such as your credit history, will be taken into account.
A new driver’s annual policy premium can be, on average, anywhere from under $1,000 to above $5,500. The higher range is typically for stand-alone policies for the new driver only. Adding that same new driver to a parent’s policy can reduce rates by up to half.
The car that the new driver uses also factors into the cost. Luxury vehicles or foreign cars with hard-to-obtain parts cost more to insure. A more practical vehicle almost always comes with lower insurance rates. If the vehicle has anti-theft features, the price can drop even lower.
Why Is Auto Insurance Typically Higher for New Drivers?
The reason that you will likely pay more for your car insurance as a new driver is that you are untested. Without any experience or driving history to review for accidents and infractions, the insurance company has no way of knowing if you are a risk or not.
Teen drivers are usually excited to gain the freedom of driving themselves. Unfortunately, teens are more likely to be involved in an accident. Car crashes are even the second-leading cause of death of U.S. teenagers. The increased risk of a new driver filing a claim leads to higher insurance rates.
Young drivers can reduce the cost of insurance by staying covered under a parent’s policy. Family policies that cover multiple individuals usually have several discounts available. This is a standard method of obtaining auto insurance while you are underage. Young drivers must be covered under an adult’s insurance unless they own their vehicle and can prove that their primary residence is different than their parents.
What Are the Best Coverage Options for New Drivers?
New drivers must familiarize themselves with the various auto insurance coverage options available, along with the requirements in their state of residence. It can seem unclear at first, but once you learn the basics, it is much simpler to shop around for the car insurance policy that fits your needs.
As a new driver, you are required to have an active insurance policy to operate your vehicle. Driving without insurance has various penalties that can include fines or loss of your license. No matter the coverage price, new drivers will have the same insurance as older drivers. Therefore, there is no new-driver-specific policy that you need to find.
Liability Coverage
Most states require you to keep liability coverage at a bare minimum. This protects you by paying car and property damages, as well as medical costs, to another party when you are at fault for the accident. Personal injury protection and MedPay are often included in basic policies in states that require this coverage. These two are essential as they will help you pay the cost of your medical bills if you are injured.
Comprehensive and Collision Coverage
For higher levels of coverage, you can opt for a policy that includes collision, comprehensive coverage, or both. Collision coverage will help you to pay for the cost of repairing your vehicle if you are involved in an accident, whether it was your fault or that of another driver. Comprehensive coverage is for damages not caused by a collision. This can include an act of nature, like a tree branch falling on your car or hail damage, hitting an animal, and even theft or vandalism.
Deductibles
Don’t forget about your deductible. At the time you purchase your comprehensive or collision insurance policy, you will have the opportunity to select a deductible that will affect your premium costs. A deductible refers to the amount of money you are required to pay before your insurance company will pay out for damages.
High deductibles keep your premiums lower but could be challenging to meet if you have an accident that requires extensive repairs. Lower deductibles may increase your premium, but you won’t have to pay as much out-of-pocket at the time of an accident. Ultimately, the deductible limit that you choose is based on your financial situation and what terms work best with your budget and reflect the value of your vehicle.
As a general rule, it’s best to purchase the highest level of coverage that you can comfortably afford. It may be tempting to select the lowest premium possible, but you could find yourself unable to pay the costs associated with an accident in these cases.
Remember always to carry proof of your current car insurance policy. It’s good practice to keep a copy in your glove box for easy access if you are involved in an incident and need to prove that you are covered or exchange insurance details with another driver.
How Can I Save Money On My Auto Insurance Policy?
When shopping for auto insurance coverage as a new driver, you can save money in the following ways.
Compare Quotes
Don’t just select a policy from the first company you receive a rate from. Instead, get several quotes from a range of insurers to see which one offers the best deal. While it’s normal to pay more as a new driver, some companies have excellent prices, and you won’t know until you do your research and compare all the options.
It’s simple to get a quote by entering your details online or calling an agent. First, however, be prepared with some basic information that is required to give you an accurate quote. This includes your driver’s license, Vehicle Identification Number, mileage, and an idea of the coverage you want.
Look for Discounts
There is usually a range of discounts that an insurance company may offer that can reduce the cost of your premiums. Some common ones for new drivers include a discount for completing a qualified driver training course and a discount for being a good student. Family plans are also generally a better financial fit. Ask an agent what discounts are available to determine if there are more that you could potentially qualify for.
Adjust an Existing Policy
Adding the new driver onto a family plan or parent’s policy can save you money. You can also consider dropping collision and comprehensive coverage on an older vehicle. In addition, liability insurance policies cost less than full coverage.
Get a Pay-Per-Mile Policy
Some insurance companies offer a different type of plan for those that live in urban areas and don’t need to drive often due to the availability of public transportation. Usage-based policies calculate your bill based upon the time you spend driving and your driving behaviors. These policies aren’t available everywhere but are worth checking into as they can save you a lot of money.
Be a Safe Driver
After you rack up some driving experience with no at-fault accidents and prove that you are a safe driver, your insurance premium could be reduced.
Pay Attention to Your Payment Schedule
Most auto insurance policies extend for either six months or a year. You can arrange to pay this monthly or in one upfront payment. Some insurance carriers offer a discount if you pay in full in one payment.
Build Your Credit
Many auto insurance companies review your credit history when giving you a premium quote. If you have made some financial missteps that affected your credit, or you don’t have much of a credit history, work on building a positive reputation and high score. This can save you quite a bit on your insurance rates.
Drive an Inexpensive Car
The make and model of the vehicle you drive can affect your premium rates. New cars for inexperienced drivers typically hike up the rates.
Choose a Higher Deductible
If you decide to purchase full-coverage auto insurance with comprehensive and collision coverage, you can reduce the cost of your premium by opting for higher deductibles. Your out-of-pocket expenses may be higher if you need to file a claim, but the premium costs are lower.
Summary
As you gain confidence and experience as a driver, you can establish yourself as a good driver and take advantage of lower rates. It usually takes a few years to see your rates drop, so use the time wisely and do your best to practice safety and avoid accidents. Remember that quote comparison is one of the best tactics to obtain the best rate on your car insurance. With just a few pieces of information, you can get access to quotes from many companies to find the best policy for you.