Have your question or comment appear below!

Buying New Car Insurance

Unknown once said: "Expect the Unexpected"

Notes: A new car purchase ban be exciting, until you get the car insurance bill! That and a few years from now when you realize the trade in value. New cars rarely pencil out, but the used car market has gotten hot, and usually people sell their used cars when they are full of problems. Those become your problems.

Shop shop shop

Still, you can get a good deal on car insurance, but you must shop around. The average consumer only gets 2-3 quotes, which is way too low, given than you might be with the same carrier for years.

Proposition 103

Prop 103 was credited in California with keeping insurance prices down, not only by guaranteeing a safe driver discount, but requiring insurance companies to get approval from the insurance commissioner before raising rates. The department wants to protect the public from excessive rate hikes. Of course, politicians can be bought and sold like cattle. Charles Quackenbush was caught here in California being paid off by insurance companies. So while Prop 103 made the insurance commissioner an elected position, it also increased the Departments powers of regulation over insurers (and potential for abuse).

Prop 103 also guaranteed safe drivers a 20% discount they were all together, accident free for three years with the same insurance carrier.

New Car rates

Because the insurer has potentially cover a greater loss, they will charge more to cover a new car. But the greatest expense by far are injury losses or wrongful death caused by a reckless driver. That's why DUI convicts pay insane amounts for car insurance. And DUIs, multiple tickets and accidents will pretty much nix your ability to afford new insurance to repair the new car.

Grace periods

Grace periods are pretty seamless in auto insurance, unless you had liability only on your old car. In that case, there could be problems if you get into an accident, because you really need full coverage, mandated by the lender. Technically you are in default of the loan, like having a mortgage without homeowners insurance. You have up to 14 days to notify your insurer.

Driving uninsured

Going bare or without protection can be a huge mistake (unless you really are broke) but can quickly make you broker(er). Way too many negatives, including the guy that runs you into that also does not have insurance.

Replacement coverage

Read your policy! Replacement cost is different than actual cash value (ACV = much lower). Companies like ADP use *special* software to minimize the amount they payout, in case you get into an accident. Replacement cost is for newer cars usually, and it will add to the premium, since the insurer is paying more.

GAP Insurance

When you buy your new or certified pre owned car, ask if the auto maker or dealer covers gap insurance. This represents the difference between your loan amount and what the car may be worth in the future. For example, Let's say you purchase a vehicle for $20,000. The book value is $19,500. With Taxes, tags, freight, etc. The final cost is $23,000. If the car were totalled in an accident when you drove it off the lot, your insurance carrier would probably not give you more than $19,500 for the car. But you would owe $23,000 on the loan. Gap insurance would pay that $3,500 difference. But you usually have to get it at the time you purchase your car. It can be expensive depending on the value of your car.

Finance companies are going to require full, comprehensive coverage on your new car until the loan is paid off. Besides cap insurance, you'll want the best coverage that you can afford, and from companies that won't fight your claim.

Fighting claims

Incidentally, to find an insurance company doesn't buy claims, call your local body shop or dealer then switch insurance companies to avoid.

Cheapest and most expensive cars

Self explanatory, if you want low insurance rates, buy from the cheapest to insure list! I own the Honda Odyssey mini van, its a great vehicle, very nice ride, spongy on the handling, but you are not getting performance.

Pay as you drive

Pay per mile insurance is exciting in the people will actually get coverage according to their use. It will turn car insurance into a super commodity and put many agents out of business. Consumers can pay much less, IF they drive low miles. More companies all the time are being approved by the California Department of Insurance.

Got Cash?

If you fully pay for your new car with cash, full coverage is still a good idea, because of car parts, sonar navigation in bumpers, etc. If the premium is over 10% of the car's value, drop comp and collision. But rarely will that happen on a new car. Unless you have multiple tickets, DUIs, accidents, etc.

To review:

• Get multiple rates;
• Switch carriers and loose your 20% prop 103 discount;
• new car insurance rates are the highest;
• Update your insurance within 14 days of buying;
• Gap Insurance?;
• Calculate if you need replacement coverage or actual cash value;
• Buy a cheap to insure car; and
• Pay per mile?

Written by Craig J. Casey

Financial Writer helping people with their insurance problems on the net since 1998.

blog comments powered by Disqus