Car Insurance for New Cars

Make and model, wheels and paint, features, financing, prices. When you’re shopping for a new vehicle, car insurance doesn’t always leap to mind. But whatever you choose, your new car will need to be insured before you can drive it off the lot, which makes shopping for car insurance a critical part of the new-car-buying process. You should start comparing rates and getting quotes as soon as you have a good idea of the models you’re interested in.

The specific car you buy can have a dramatic impact on your insurance rates, and insuring a new car isn’t quite as simple as adding it to an existing policy, even if you already have insurance. Your insurer will need some time to figure out how your new car will affect your rates, and you’ll need to decide whether you want to maintain the same level of coverage at potentially higher or lower rates. You might prefer a higher deductible or more comprehensive coverage if your new car is much newer or nicer than your current car.

Whether you’re buying a new car using traditional financing or leasing one, you should consider getting a specific type of car insurance coverage called gap insurance. In fact, most leasing agreements and some financing agreements actually require gap insurance.

So what is it? Gap insurance protects you in the event that your new car is totaled. It covers the gap between current market value and whatever you still owe the lender. That’s why gap coverage is worth looking into, especially for brand new vehicles. Everyone knows that a new vehicle loses value as soon as you drive it off the lot.

Let’s say you finance a new car purchase for $30,000, and a few days later, you’re in an accident and your brand new car is totaled. Remember that car insurance will only pay you current cash value, which may be thousands of dollars less than the amount still owed on the loan. If your totaled car is worth $25,000 at the time of the accident, you’ll be left holding the bag for $5,000 in addition to any deductible you may have to pay if it’s an at-fault accident. The purpose of gap insurance is to cover that gap between current market value and whatever you still owe. Gap insurance isn’t always a great deal, but it can be very effective for lessors and drivers who still owe a lot of money on a new car.

The bottom line about new car insurance: you’ll need to do your homework… again. Ideally, you should investigate the cost of insuring each of your top choices before you pull the trigger on a new car. While it’s true that your existing policy may automatically cover a new vehicle for a short period, updating your coverage shouldn’t be put off until the last minute. Make finding the right insurance a priority up front in order to avoid headaches and surprises later.