Does It Cost More to Insure a New Car?
- Does It Cost More to Insure a New Car?
That new car smell, the new features, a new look and feel – getting a new car is exciting, to say the least. What’s not as glamorous is getting insurance. You probably want (and are likely required) to protect your new car with auto insurance.
But how will getting a new vehicle affect your rate? Let’s take a look to find out if newer cars are more expensive to insure in general, and if adding a new car to your existing insurance policy will cost you.
Does It Cost More to Insure a New Car Than an Old Car?
Yes, car insurance for a new car likely costs more than a typical used or old car because you may be required to purchase full coverage instead of being able to settle for liability only. But, many more factors go into your auto insurance premium than the age of your car, so it’s hard to say in all cases. It also depends on where you live and how much coverage you want.
It’s important to note that getting a new car will mainly affect your collision and comprehensive coverage. While not required by the state like liability coverage is, most drivers still have one or both of these insurances if they finance their vehicle. Having collision and comprehensive insurance is often called full coverage.
Liability coverage protects other drivers on the road. Your liability doesn’t necessarily change when getting a new car. Collision and comprehensive coverage protect your vehicle. If your vehicle changes, then what you need your collision and comprehensive coverage to protect changes, too. This will likely affect how much you pay.
When looking at the sum of its parts, a newer car is more valuable than a typical used car. A new car costs more to buy and more to repair in comparison. So, if your car is totaled in an accident or stolen, your insurance company will typically need to reimburse you more money for a new car than a used car.
For instance, your insurer could charge you more to cover a new Mercedes than a used Honda because the Mercedes costs more to replace. All other variables aside, this is a safe assumption. But, this might not be the case if you’ve got a vintage car. A classic old or unique car is valuable in its own right, and this would cost more to cover than a typical used car, too. Think of a vintage Ford Mustang or GT.
Getting a new car doesn’t always translate directly to higher rates, though. Newer vehicles have more safety features, like backup cameras, automatic braking, and collision warning. Providers like to see these when covering vehicles and often offer discounts to policyholders who have them in their cars. So, this could offset some rate hike.
When You Buy a New Car, Is It Insured?
A new car doesn’t come with insurance. It’s the driver’s responsibility to get and maintain an insurance policy on their vehicles. When buying a new car, you need to have insurance in place before you’re allowed to drive it off the lot.
If you’re leasing or financing a car, your lender will require you to get full coverage in addition to the state’s required liability coverage. The dealership will likely have some policies they recommend on the spot, but it’s best to do your own research beforehand. The plans they offer you might not be the best options available.
If you’re completely funding a new car purchase yourself, you’ll only need to have liability coverage. You’ll need to update your existing policy with your insurer as soon as you can, but we’ll explain this more a little later on.
Is Insurance Higher On Newer Cars?
If you’re leasing or financing a new car, your lender will require you to get full coverage. If you initially had only liability coverage on your old car, you’ll definitely see your rates increase with this added coverage. Unfortunately, there’s no way around this. Your lender shouldered some of the cost to buy your vehicle, and they’ll make sure their investment is protected sufficiently by mandating full coverage.
Also, you may want to consider GAP coverage on your new, financed car. Guaranteed Asset Protection (GAP) insurance covers the difference between the amount of money you’d receive from collision or comprehensive coverage if the car is stolen or totaled and the amount you still owe to the lender.
Your insurer doesn’t always reimburse you exactly what you paid for your new car since it depreciates right after you drive it off the lot. Your lender would be paid whatever the insurance company gives you, and you’d still be on the hook for whatever is remaining. GAP insurance eliminates this need for you to foot any of the bill.
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How Much Will My Insurance Go Up With a New Car?
Your insurance will likely go up some with a new car. How much your insurance will increase when you get a new car depends on a lot of factors, though, so it’s hard to give an estimate. Don’t be surprised if your rate increases by 10%. If you’re sticking with the same company that you’ve been with for a long time, you may not experience much of a rate hike at all.
It depends how new of a car you’re getting and what you’re upgrading from. While it costs more to cover a new car, the upgraded safety features may also mean it’s less risky to drive, which could offset some rate increase. In addition to considering safety features, some insurers also offer insurance discounts for new cars in general. It varies by company, so be sure to ask what discounts are available.
If you’re adding another driver in addition to the new car, your rate will likely increase. Another driver means another person to cover, which means a greater likelihood of a claim. Their driving history will influence how much the insurance rises, too.
It also depends if you were making payments on your old car or if it was paid off. If you’re making payments on a new car, you’ll need more coverage. Other factors, like your credit score and marital status, may also influence your rate.
How to Add a Car to Your Insurance
The process to add a new car to your existing insurance is similar, whether you’re adding an additional car to your policy or you need to update your coverage after upgrading to a new car from an old car.
When you’re replacing your old car with a car that’s new to you, you can notify your insurance company shortly after you get it. You usually get a grace period where your current coverage protects your new vehicle before you officially have to update it. This varies by company, but it likely isn’t longer than two or three weeks.
At some point during your grace period, you need to notify your car insurance carrier that you have a different car. Some major carriers allow you to do this completely online, but you can always call, too. You’ll have to answer questions about potential changes in coverage that may affect your rate.
If you’re keeping your initially covered car and just adding another vehicle to your existing policy, let your provider know beforehand if you can. You’ll need the license plate number as well as the make, model, and vehicle identification number (VIN).
Adding another car to your insurance may raise your rate or not depending on your insurance company. Some carriers also have limits to the number of vehicles you can add, so be aware of this.
How to Get Insurance on a New Car
If you’re getting a car and insurance for the first time, you still won’t be able to leave the dealership without a policy. You can (and should) shop for car insurance before you buy a new car.
Most carriers will give you a quote if you have the year, make, and model of the vehicle you want to insure. If you’re looking to buy a car that’s listed online, the seller may have put the VIN in the description somewhere, which can also help you get a quote before you buy.
Then, you can communicate with the insurer to have the right policy with proof of insurance when you make your purchase.
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The editorial content on Clovered’s website is meant to be informational material and should not be considered legal advice.