Are you in the process of buying a new vehicle? Are you excited about your purchase, but unsure of the impact it’ll have on your auto insurance coverage?
As you know, it’s critical to have an active auto insurance policy at all times. Without this, you’re violating the law, which can result in serious trouble.
Rather than take a risk, here’s what you can do to ease your mind when buying a new vehicle:
The moment you begin car shopping is the moment you should consult your broker. Even if you don’t end up making a purchase, the information you gather is invaluable to the process.
Here are some of the many questions to ask your broker:
• How will my insurance premium change if I purchase a new vehicle?
• Do you suggest an adjustment in coverage alongside the purchase of a new vehicle?
• Can you assist me on the day that I purchase the vehicle, such as providing the dealership with the necessary information?
You may be surprised at the answers to some of these questions.
For example, if you’re trading in a 2005 model for a 2020, you can expect your insurance premium to increase. Just the same, you probably need to adjust your coverage to ensure that you’re fully protected.
As you close in on the big day, ask the dealer what they need regarding proof of insurance. It’s better to get this in order upfront, than to find yourself scrambling for information and documentation when all you really want to do is enjoy the shopping experience.
Once you have a list, contact your broker or insurance company directly for assistance. They may even be able to share all the necessary information with the dealer, thus removing you from the process entirely.
You understand how important is it to carry a comprehensive auto insurance policy. But have you given any thought to vehicle replacement protection, such as diminished value and negative equity coverage?
Negative equity is a big concern when financing a vehicle. In short, this is the financial difference between the amount you owe on your loan and the actual value of the vehicle.
If you suffer a total loss, your insurance company will only pay the actual cash value, leaving you responsible for the negative equity.
You can purchase coverage to protect against this, which you can discontinue at any point (such as when you pay off your loan).
Diminished value coverage is also a consideration, as your vehicle won’t be worth as much money after an accident. Your insurance company will pay to repair your vehicle, but they don’t do anything about the fact that it lost some (or most) of its value.
While you can add one or both of these coverages to your policy at any point in the future, it makes sense to consider them when buying a vehicle. This is particularly true of negative equity protection.
So, if you’re in the market for a new vehicle, don’t get so caught up in the details of the purchase that you overlook what you need from an insurance perspective.
Do More Expensive cars cost more to insure?
Absolutely. Insurance costs are tied to the cost of the underlying assets. The more expensive the thing you’re trying to protect is, the more you’ll need to pay insurers to protect it. Insurers have to charge higher rates in order to make up for the higher potential loss. If you crash a very expensive car, the company has to pick up a sizable bill. Therefore, you can expect proportionally sizable monthly payments.
Does the color of my car affect insurance rates?
That is a very common belief. People say a study found that cars of certain colors, like red or black, get into accidents more often. They say that insurers know this, and calculate your rates accordingly. Fortunately, this widespread theory is no more than a myth. Insurers don’t even know your car color, most of the time. They typically only have your vehicle’s VIN number, make and model, and couldn’t factor in color even if they tried. That said, certain types of cars, like convertibles and race cars, often cost more to insure.
What is deductible car insurance?
Auto insurance, like most types of insurance, will cover a certain monetary amount in case of accidents and damages. Additionally, policies will list a certain dollar value as “deductible.” A car insurance deductible is simply an amount of money that policy owners need to pay before insurers step in. After you’ve paid your deductible, your insurer will pick up the rest of the tab. Deductibles are often in the hundreds or thousands of dollars, depending on the policy.