Car Insurance for First-Time Buyers

Whether you're a young driver or purchasing a vehicle later in life, use these tips to learn how to shop for car insurance.

Car insurance tips for first-time buyers


Auto insurance isn't exactly an exciting topic. Nevertheless, it’s a necessary — and expensive — evil if you're planning to drive. If you’re purchasing car insurance for the first time, it’s important to know exactly what you’re paying for. Let’s explore the ins and outs of car insurance for first-time buyers.


Getting auto insurance for the first time
  1. What do you need to get a car insurance quote?
  2. What goes into your quote?
  3. How much insurance do you need?
  4. How can you save?




What information do you need to get a car insurance quote?


It won’t take you long to realize shopping for car insurance quotes is a dull affair. To speed up your shopping experience, you’ll want to have the following information handy:


Personal information for anyone on the policy
  • Driver's license
  • Date of birth
  • Address
  • Occupation
  • Marital status
  • Education level
  • Driving history
  • Insurance record

Vehicle information
  • VIN (Vehicle Identification Number). This 17-digit code tracks the individual history of every vehicle. If you can’t provide an exact VIN, make sure you can at least provide the year, make, and model. However, you’ll eventually need the VIN to get car insurance.
  • Date of purchase
  • Registered vehicle owner (if not you)

While you don’t necessarily need all of the above to get a quote, providing comprehensive info will result in the most accurate quote possible. Presenting inaccurate information — purposefully or otherwise — will eventually come up in your quoting process and your rates will change accordingly.





What factors go into a car insurance quote?


Car insurance is designed to reflect the risk you present to your car insurance company. By risk, we're referring to the likelihood you will get into an accident. While a number of things comprise your driving record, the primary factors that influence premiums are broken down below.



Driving history

A history of at-fault accidents, citations, or moving violations is the biggest indicator of risk for an insurance company. Because the company would be on the hook for any damages you caused, they may seek to defray exposure by charging you higher premiums for coverage.


Average Annual Car Insurance Rate Increases by Violation History

Accident/Violation Average Annual Premium Increase
None $1,427
Driving too slowly $287
Speeding 11 - 15 MPH Over Limit $298
At-Fault Accident — Greater than $2,000 $687
Reckless Driving $1,054
DUI $1,092
Racing $1,101
Hit and Run $1,218

The more driving experience you have, the lower your premium will be. This is why younger drivers typically pay more for car insurance than do more experienced drivers.



Credit Score

Like a poor driving record, a poor credit score often leads to higher car insurance costs. Insurance companies base these decisions on data suggesting drivers with low credit scores are more likely to file a claim — and more likely to file a more costly claim than is a driver with an exemplary credit score.


Average Annual Car Insurance Premium by Credit Level

Credit Level Premium
Poor $2,687
Below Fair $2,191
Fair $1,800
Good $1,495
Excellent $1,257


Vehicle

If you have a vehicle with off-road capabilities, a high MSRP, and/or a powerful engine, your car insurance costs will be higher than average. Since an insurance policy is designed to protect and replace your vehicle in a covered loss, a more valuable vehicle costs more to insure, which will be reflected in higher collision and comprehensive premiums.


Average Annual Car Insurance Premium by Vehicle Type

Vehicle Type Average Annual Premium
Sedans $1,724
Hybrids/electric vehicles $1,654
Luxury vehicles $2,018
SUVs/crossovers $1,579
Trucks $1,535
Vans $1,484


Location

Insurance is regulated at the state level, but often priced at the zip code level. If you live in a no-fault state such as Michigan, expect your premium to be higher. If you live in an urban area with a large number of claims — or near a coastal area prone to flooding — be prepared for high premiums.


Most Expensive and Cheapest States for Car Insurance

Most Expensive States Least Expensive States
Michigan — $2,610 North Carolina — $901
Louisiana — $2,225 Virginia — $901
Kentucky — $2,050 Maine — $927
Rhode Island —- $2,004 Iowa — $1,015
Florida — $1,878 Idaho — $1,018
Texas — $1,810 Vermont — $1,027
Nevada — $1,802 Ohio — $1,037
Mississippi — $1,800 Wisconsin — $1,040
California — $1,731 Hawaii — $1,079
Delaware — $1,700 New Hampshire — $1,083




How much insurance do you need?

While you’re getting a quote, the insurance agent will ask what kind of coverage you want. If you’re not familiar with car insurance, this can be a daunting question. Consider the following options when building your first car insurance policy:



Liability

Every state — except Virginia and New Hampshire) — require bodily injury and property damage protection. These coverages are designed to protect other drivers from damage you cause, up to the policy limits of your policy. Broken down, the state limits for most states will look like this (although the amounts may vary): 50/100/50.


50 / 100 / 50
$50,000 in bodily injury coverage per person $100,000 in bodily injury coverage per incident $50,000 in property damage per incident

Unless otherwise stated in a loan or lease contract, you’re only required to meet your state’s minimum liability limits. It’s highly recommended to carry more than that. If you are involved in an accident in which your liability coverage's limit is exceeded, you’re on the hook for the remaining value.

If you live in California and carry the state-minimum coverage. If you total someone’s Ford F-150, with an MSRP of more than $27,000, your property damage liability coverage would only cover $5,000. Depending on your financial situation, this could cause some serious turmoil.

We recommend setting your liability limits as high as 100/300/100, if possible.



Optional coverage we recommend:


Comprehensive and collision:

Unless you own your vehicle outright, you’ll probably be required to maintain collision and comprehensive coverage. These coverages, unlike liability, are designed to protect your car. Collision, as its name indicates, protects your car if you strike a fixed object such as a pole or wall. Comprehensive coverage is designed to handle any gaps, including damage caused by weather, theft, or animals.

Even if you don’t own your vehicle outright, we recommend collision and comprehensive insurance if your vehicle is worth more than $4,000. In the event your vehicle is totaled, this is the coverage that would provide compensation for your loss.

These coverages work by using a deductible: the amount you pay for a claim payout. Standard deductibles range between $500-$1,000. Because your premium and deductible are inversely related, the higher your deductible, the lower your premium. Keep this tip in mind when considering cost-cutting solutions.


Uninsured Motorist Coverage:

In many states, uninsured motorist coverage is required. This coverage, broken down into bodily injury and property damage, protects you from uninsured or underinsured drivers. Underinsured drivers are potentially problematic in scenarios in which the value of the damage exceeds the at-fault party’s liability limits.

These coverages are recommended because they shield you from penalty when someone else makes a mistake. While your insurance agent might tell you collision coverage works the same as uninsured property damage coverage, be wary. Although they both have deductibles and protect your vehicle from collision damage, they’re often rated, i.e., charged differently on your insurance premium. Collision claims are often seen as at-fault accidents and can lead to premium increases. Uninsured Property Damage claims, by definition, are seen not-at-fault claims and are much less costly.


Gap Insurance:

If you are leasing or have a loan on the vehicle, we recommend this coverage. Basically, gap insurance is designed to cover the difference between the value of the loan and what your insurance company will pay you if you total your vehicle. Because insurance companies factor depreciation into your claims payout, this coverage prevents you from ending up underwater on a loan.





How to save on your first car insurance policy


Once you find the coverage you need, you’ll soon realize car insurance is pretty expensive. Let’s look at some ways to keep your premium as low as possible.



Understand how your claims impact your rate

Car insurance is a double-edged sword. The more you use it, the more expensive it becomes. While we briefly touched on this above, filing a collision claim can drastically increase your premium for the next three years. If you’re thinking of filing a collision claim, consider our advice first.


  • Get an estimate for the repairs at a local mechanic
  • Use our State of Insurance analysis to determine the average premium increase if you were to file a claim in your state. Remember to think about this cost spread over three years.
  • Compare the cost of repairs to the potential rate increase plus your deductible. Choose whichever option is more affordable.

While the premium increase you will face is dependent on your insurance company and location, below are average rate increases across the US after an at-fault claim.


Average Rate Increase after at At-Fault Claim

Increase at 6 months Increase at 12 months Increase at 3 Years
+$291 +$582 +$1,746


Consider the following discounts

  • Multipolicy discount
  • Safe driver discount
  • Good student discount (ages 16-25)
  • Good/safe teen driving discount (pre-approved safety training course)
  • Telematic programs
  • Payment by bank account
  • Paid in full discount
  • eSignature discounts
  • Paperless billing discount
  • Multi-vehicle discount


Shop around

After all is said and done, you might be paying too much for car insurance because you’re with the wrong company. The best way to either confirm you’re getting the best rate — or to find a better rate — is to compare prices from as many companies as possible. Enter your zip code below to compare rates from more than 200 top insurance companies.


Compare over 200 insurance companies at once!




Additional resources


Still looking for answers? See our additional articles.