July 31, 2011

Budgeting For Car Insurance When Buying A New Car

Car insurance is a big part of driving in the United States that is required for all drivers. Coverage is more expensive and thorough on new cars. New car coverage typically has all of the various features that car insurance has to offer. Drivers that have older cars or cars that are completely paid for can opt into lower coverage amounts like liability only coverage or lower the limits in their coverage. When you are looking at buying a new car, budgeting car insurance is important to account for. You may be able to afford the monthly insurance bill on your current car, but that could go up drastically with the purchase of a new one for a few reasons including coverage requirements.

Many people do not buy a car with cash or a check. Instead, people generally get a car loan to pay for the vehicle over a number of years. This makes paying for the car easier, but requires more extensive insurance coverage. When people take out a car loan, the bank owns the car until it is completely paid for. The banks insist on maximum coverage to protect their investment. If you are not used to having full coverage, the car insurance price will seem like a big increase. Full coverage includes options like no-fault insurance and uninsured motorist insurance. These options along with the other aspects of full coverage increase the price quite a bit over liability only coverage that many drivers have for older cars.

Another thing that makes budgeting car insurance important when purchasing a new car is that insurance on a new car is more expensive than older cars. Newer vehicles cost more to repair and replace than older ones, so insurance companies need to make sure to charge enough to cover the potential losses. Drivers can expect their monthly insurance costs to go up significantly when buying a new vehicle. If you are used to paying for liability only coverage on an older car, then the jump to full coverage on the new one will be a big one. Insurance companies take on a lot more risk with newer vehicles. Insurance companies charge premiums based on the risk they take on.

The risk and cost both go up for drivers with a new vehicle. Banks insist on maximum coverage to protect their investment while insurance companies charge more for newer vehicles. The best way to prepare is to run price quotes online. If you know what kind of car you are going to purchase, you can enter that information along with your driving history to get an idea of the price ahead of time. Contact your insurance agent with any specific questions.