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Auto Insurance Factors and Buying a New Car

Individuals looking to purchase a car, whether its new or used, have to take into consideration the factors and costs involved with buying car insurance.

Factors That May Affect Your Car Insurance Premium

That brand new high-powered sports car that barely fits within a modest budget may prove to be too expensive when car insurance factors are taken into consideration. A wise car buyer will spend a little time chatting with an insurance agent prior to signing on the dotted line for the new car purchase. A little homework up front goes a long way when it comes to buying a car. Read also: How to Find the Right Auto Insurance for a Car.

State Mandated Auto Insurance Coverage

All 50 of the United States have mandatory car insurance laws. Although insurance is mandated in each state, the liability requirements differ. Drivers should check with the Department of Insurance for their state to become familiar with the legally required car insurance coverages. It is recommended, however, to purchase liability limits in excess of the state mandated minimums.

Car Liability Insurance

In the insurance field, car liability insurance is called third party coverage. The first party is always the insured, the second party is the insurance company and third party is the injured individual or damaged property that may give rise to a liability suit. Auto liability insurance provides coverage in the event the policyholder has an accident with a third party and causes damage. In essence, it provides a financial solution to third party damages.

Physical Damage Coverage

The physical damage section of the auto insurance policy provides first party protection. In other words, if the driver's car is damaged as a result of an insured peril, she can seek financial help from her own insurance policy.

While liability coverage is mandatory in every state, physical damage coverage is not. Be mindful, however, that vehicles with an outstanding loan or lien may be required by contract with the lending institution to maintain physical damage coverage on the vehicle until the loan is satisfied. Lending institutions want to protect their financial interests. Read also: What are the differences in auto insurance between states?

Automobile Underwriting Requirements

Insurance underwriters require specific information to provide insurance quotes for car insurance. Basic information such as the year, make and model of the vehicle gives them a quick method for evaluating risk. In addition to the type of vehicle, the underwriter needs to know where the car is being garaged (city/state), whether or not it's used for business or pleasure and the number of miles it will be driven each year.

Having safety features such as anti lock brakes, airbags and built in theft deterrent systems helps to put underwriters at ease and result in premium discounts.

Driver Information

One of the most important factors when it comes to rating a car insurance policy is the driver information. Information such as age, gender and number of years licensed can increase or decrease premiums. Additionally, a driver's driving record and credit history are taken into consideration when determining auto insurance premiums. Read also: Tips for Buying Auto Insurance in Rhode Island.

Speak to an Insurance Agent

Using the internet to perform preliminary research will provide a plethora of automobile information. However, the best way to truly understand how an insurance company views a particular car model or driver's underwriting information is to speak to an insurance agent . Take a little time and place a call to one or two insurance companies. Agents, who welcome the possibility of landing a new customer, are a great resource and can provide helpful information.


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