Managing personal finances for a young adult can be a daunting task. From negotiating the price of a first car to allocating money towards paying for a new home, it seems like personal finance is a never-ending cycle of having to make tough decisions. Buying car insurance brings its own issues to the personal finance table.
You do not have to make buying car insurance a hair-pulling exercise in frustration. Follow these tips for first-time car insurance buyers to maximize your savings.
First Things First: Home Much Insurance Do You Need?
How much auto insurance do you need? You have to answer one important question: how much can you afford to pay in out-of-pocket costs? An auto accident can generate hundreds, if not thousands of dollars in repair expenses.
Let’s look at what you should purchase:
- State-mandated liability auto insurance coverage
- Additional insurance if you own a home and/or have a healthy amount of money saved
- Comprehensive and collision coverage if you owe money on your vehicle
Remember that liability insurance is not enough to pay for serious injuries and to replace newer car models. It is only enough to operate a motor vehicle legally in the state where you live.
The Insurance Information Institute (III) recommends motorists of all ages carry a minimum of bodily injury liability coverage of $100,000 per person and $300,000 in coverage for every accident.
Auto insurance is a product, and what should you do when shopping for any product? That’s right, you want to compare auto insurance quotes by price shopping. You should start by comparing quotes online by using an auto insurance rate comparison tool. Then, contact the companies that offer policies that fit within your budget to confirm rates.
Beware the company that offers an auto insurance policy that falls well below the average cost of a policy. The coverage offered for a cheap policy might not be enough to cover your auto insurance needs. Every insurance company receives a rating from Moody’s and Standard & Poor’s. Make sure you refer to both resources to confirm rates.
Know What’s in the Policy
As a legal contract, an insurance policy if often loaded with technical terms that confuse consumers. Before you sign on the dotted line, read the policy to answer the following questions.
- Who receives coverage?
- What is covered?
- When does coverage start and end?
- How much is covered?
- What is the monthly premium?
- How do you file a claim?
Make sure you also read the fine print, which should explain what coverage limitations apply to your auto insurance policy.
Change Policies When Your Needs Change
Even as a young adult, you can expect to go through some life changes. Every time something significant happens in your life, you should consider changing policies when your current policy expires.
Here are the possible reasons why:
- Starting a family
- Purchase a home
- Add features to your current car
- Making a major purchase
- A dramatic change in income
- You became responsible for taking care of a parent
A Clean Driving Record Matters
Auto insurance companies consider one factor to be more important than any other factor when it comes to determining rates: Driving record. If you have been in one or more auto accidents, you can expect to pay more for car insurance. One way to counteract a less than perfect driving record is to earn a safe driving certificate that is recognized by your auto insurance company.
Finally, credit history also plays an important role in determining your car insurance rate. Although you have not established a credit history that spans decades, an auto insurance company will check your credit score to calculate your credit risk. Take measures such as paying down debt and not applying for credit before you apply for car insurance.