So, you’ve got a brand new eco-friendly car! Before you take it for a spin, you need car insurance. The law is clear on this. Your existing car insurance covers the new vehicle once you drive it out of the yard. However, if you don’t have physical damage or liability protection, you may not be able to get your car out. Worse, you could get into trouble with the law.
Below are seven things about how insurance works on a new car:
1. You can transfer the old insurance to the new car
While your old car insurance is good for the new eco-friendly car, don’t rush to make the switch. Insurers usually give you a grace period within which you must upgrade your policy to reflect the new vehicle. All your dealer wants to see is proof of insurance before letting you drive away with your new car.
2. You will pay more insurance on the new car
Many new car owners don’t know that they will pay more insurance on a new car compared to an old one. Obviously, a new car has a higher value than your old one. What this means is that you will pay a higher rate for the new vehicle. How much you pay depends on several factors.
These include the model year, model and make, coverage amount purchased, and damage and title history. Other factors could also affect your rate when taking a new policy. However, you could still qualify for some discounts. As a rule, always ask about Keller car insurance first.
3. The difference between comprehensive and collision coverage
This is the main area of confusion when dealing with how insurance works on a new car. Most people don’t seem to fully understand what they’re purchasing. Comprehensive coverage provides protection against damage and theft caused by anything other than a collision, which may include hitting a deer, falling trees or rocks, hail, vandalism, flood or a fire.
Collision coverage reimburses damage to your vehicle caused by collision with another object or vehicle when you’re at fault. Damage from rolling your car or by ramming into potholes is also covered.
Both collision and comprehensive insurance are optional. Liability insurance is required by law because it covers the costs associated with death, injuries or damage to another property or vehicle while you or another driver is driving your vehicle.
4. A more expensive car doesn’t necessarily cost more to insure
When you begin shopping for a new car, it’s important to consider the insurance cost for the different models you are looking at. An expensive eco-friendly car may end up having better claim rates in case of theft or accidents compared to a low-priced car. As a result, the premiums could be much lower.
5. Personal auto Insurance doesn’t cover using your car for business
Most policies don’t cover using your car for business purposes. Actually, some companies will revoke your policy if they realize you are doing this. If you use your car for a side gig like pizza delivery, ensure you are covered for it since if you find yourself in an accident, you might be held accountable for everything. Consult your insurer about having an endorsement added to your policy to cater to business driving.
Ride-share drivers like Lyft and Uber are adequately covered by the ride-share company, but only when a customer is in the vehicle. They are not covered in between customers.
6. How car insurance prices are determined
Each insurance company uses its own formula to calculate premiums, but the same basic factors are considered throughout the industry. These include the more obvious ones like your driving record. How the vehicle is used and the model and make of the car are also considered.
Your marital status, age and gender are also factored into how much your auto insurance costs. Statistics show that male drivers and young drivers who aren’t as experienced behind the wheel are more likely to be involved in an accident. By contrast, married drivers are considered less likely to be involved in an accident.
Where you live also plays an essential role in how the prices are determined. If you reside in an area with high crime rates, you will most likely be considered a bigger risk than another policyholder using a similar car but who is living in a rural area with fewer break-ins and car thefts, and less traffic.
Most insurance companies also factor in credit scores when calculating premiums. Statistics show that drivers with a good credit score tend to have fewer accidents. Consumers believe this is unfair for lower-income car owners, and they want it outlawed.
7. Car insurance discounts
Most companies offer an auto insurance discount for things like car safety features, a safe driving record, anti-theft devices, payment in full and electronic payments. Make sure you get a reward for driving safely and equipping your car with safety features.
By understanding how car insurance works and which coverage types are mandatory, you can make a better, more informed decision. Shop around for a car insurance provider who is likely to appreciate and reward your safe driving record.
