When you purchase a new car, you must get an auto insurance policy for it. Here's what to know about auto insurance if you're buying a new car.
You'll Probably Need Certain Auto Insurance Coverages
State laws require drivers to include certain minimum levels of liability coverage in their auto insurance policies, but most states don't require all drivers to carry coverages that protect their actual car.
Unless you purchase your new car outright, however, you'll have to get coverages that protect the actual car that you're buying. Auto loans and leases normally require you to carry three coverages that provide protection if your new car is damaged.
Collision coverage pays to restore or replace your new car if it's damaged in an auto accident. For the purposes of insurance, an accident is defined as a collision that involves at least two moving vehicles.
Comprehensive coverage pays to restore or replace your new car if it's damaged in some other sort of incident.
Gap coverage pays off any loan or lease balance that exceeds your new car's value if the car is destroyed in a collision or comprehensive incident.
Loans and leases require these coverages in order to make sure that the lender won't sustain a financial loss if your new car is totaled. You can expect to need these coverages for as long as you have a loan or lease on your new car.
You don't have to procure these coverages if you own your vehicle outright since there's no lender that has a financial interest or claim on the vehicle. It often is wise to carry comprehensive and collision coverage when you have a new car, though, because replacing a totaled car that's still relatively new isn't cheap.
Your Premiums Will Likely Go Up
Auto insurance premiums are affected by many factors. Two of the more prominent ones are the value of your vehicle and the coverages that your auto policy has. When you purchase a new car, both of these factors typically are high — your car is worth a lot and you're required to carry a number of coverages.
Thus, you can expect to pay higher auto insurance premiums when you purchase a new car. How much your premiums change will depend on what car you currently drive, what car you purchase, and what other factors impact your personal rates. An insurance agent can help you determine exactly how a particular new car will impact your auto insurance premiums.
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