What Every New Driver Needs to Know About Car Insurance

What Every New Driver Needs to Know About Car Insurance

insuranceAs a new driver, I offer you the New Driver Timeline:

Pass the written test: Check

Practice driving with a learner’s permit: Check

Pass the driving test: Check

(And then celebrate: Check)

Buy first car: Check

Get it insured: … ummm

It turns out there are a few things to learn before ticking this one off the list.

In a perfect world, car insurance wouldn’t exist. We wouldn’t need it. But it’s all too clear that we live in a reality where even the most attentive, skillful drivers can still get hit by someone driving with reckless inattentiveness. In the big picture, drivers are lucky to escape these encounters with only a damaged vehicle; all too often vehicle collisions result in life-altering physical traumas. Insurance exists to ease the financial burden of vehicle repairs and hospital bills.

Car insurance is a legal requirement in Canada and most States in the US. New Hampshire and Virginia do not have such requirements, and in all honesty it’s a little unsettling to drive behind an uninsured car with “Live Free or Die” emblazoned on the license plate.

“Virginia is for Lovers” feels slightly less worrisome. Go figure.

Joking aside, understanding car insurance is an integral part of being a safe driver. We need to understand what’s covered on our individual insurance plans to know how best to be prepared and how to respond in case of a collision.

Every province and state has its own requirements for the minimum amount of car insurance one must hold to be legal on the road. Before deciding upon coverage, it’s important to investigate the insurance rates by state and rates by province that will affect you.

Liability vs. Collision vs. Comprehensive Coverage

Liability Insurance covers damage to the other vehicle if you are the one at fault for the collision. This kind of insurance consists of two branches: one branch covers bodily injury and the other covers property damage. Keep in mind, all of this is coverage for the other person. Liability insurance does not cover your personal injuries or damage to your car.

Collision Insurance covers damages to your vehicle due to any sort of collision that occurs while driving – running into another car, hitting a tree, etc. It does not cover damage inflicted while the car is parked. This isn’t going to help you if a long-boarder runs into your car while it’s parked in front of the house.

Also, like many health insurance plans, this coverage is subject to deductibles.

Comprehensive Coverage covers most of the situations not covered by liability or collision insurance. Things like natural disasters, theft, vandalism, or damage from a deer hitting your car. Comprehensive coverage will only reimburse the value of the vehicle, so if you drive an old car with a low market value, it might not make sense to invest in comprehensive coverage. (You could end up paying more in monthly premiums than the car is worth.)

While there is no such thing as true “full coverage” for a vehicle, most people consider a car fully insured when it’s covered by all three of these policies.

Car Insurance Premiums

Insurance premiums are the regular payments that a policyholder makes in order to maintain auto insurance coverage. Payments are often due monthly, but some companies bill every 3-6 months. It all depends on the carrier.

Car insurance companies use a number of factors – what kind of car you drive, credit score, driving record, etc. – to determine what your insurance premiums will be. Adding a new driver, a teen in particular, to your insurance policy will increase payments by $1,200 on average every year.

The benefits are 1) if the teen does get in a collision, they’re covered. 2) The longer a new driver is covered on a parent’s insurance policy, the lower their payments are likely to be once they go out on their own.

Teens should be aware of all the aspects associated with being added to a parental insurance plan; the costs and the benefits.

Going Insuranceless

Going insuranceless is a lot like going pantsless. If you’re spending any time out and about, it’s just a bad idea. Like I mentioned earlier, in Canada and most of the US it is a legal requirement to at least have liability insurance. And honestly, even in the states that don’t require insurance, there are caveats.

In New Hampshire, the Live Free or Die state, an uninsured motorist is fully liable for damage to another vehicle – they must be able to pay it – and cover the person’s medical expenses as well.

When you look at it that way, it should come as no surprise that New Hampshire actually has one of the lower uninsured driver rates in the nation.

Pro Tip: Keep your pink card, or any other insurance cards, in your wallet instead of in the glove box. Or better yet, save electronic copies. Auto insurance identity theft is becoming more and more common, and it usually starts with a thief breaking into the car and making off with insurance documents.

How has auto insurance impacted your life? Share your story in the comments!

Guest Author: Katie la Kapro

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