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car insurance for first car

Car insurance for your first car

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Got new wheels? Find out how to choose and save on your first car insurance policy.

Buying your first car can be an exciting time but comparatively tough on your wallet. As you’ve probably realized, the actual cost of a car is only the tip of the iceberg. There are a number of other expenses involved before you can get on the road.

Car insurance is one of the biggest expenses you will face. You must take out a car insurance policy in most US states. You will also need to consider what type of damage coverage is right for you.

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Compare top car insurance providers

Name Product Roadside assistance New car protection Available states
Liberty Mutual
Included free
Yes, cars under 1 year old & 15,000 miles
All 50 states
Car insurance through Liberty Mutual will give coverage options for almost any situation.
Allstate
Included free
Yes, cars under 2 years old
All 50 states
Enjoy having your own dedicated agent to help you get the best discounts and coverage.
Root
Included free
No
Arizona, Arkansas, Delaware, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Montana, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Texas, Utah
Root offers simple, affordable insurance that’s ideal for good drivers. Try the Root app for 2 weeks and see how much you could save. Available in 20 states.
Esurance
Optional
Yes, cars under 1 year old & 15,000 miles
All states except Alaska, Delaware, Hawaii, New Hampshire, Montana, Vermont, Wyoming
Esurance offers a modern online and mobile experience that helps you take your insurance on the go. Available in 42 states.
USAA
Included free
No
All 50 states
USAA offers affordable car insurance with highly rated customer service to millions of military members and their families. Only available to military members, veterans and affiliated military members.

Compare up to 4 providers

Understanding the different types of coverage

You only need to worry about the main types of car insurance coverage, and they are all very different from each another.

  • Liability coverage. Compulsory third party insurance will cover liability charges in the event you are involved in an accident. This coverage ensures that the driver at fault will always have an insurance policy that can pay for any injuries caused.
  • Personal injury insurance. If you’re involved in a car accident, PIP pays for the medical services you may need afterward including ambulance rides, nursing care, prosthetics, lost income, childcare and funeral services. PIP will apply regardless of who’s at fault in an accident.
  • Uninsured motorist coverage. If another driver doesn’t have insurance, you won’t have to liaize with them to receive compensation. Instead, your own insurance will cover your expenses. You can choose to have bodily injury (UMBI) or property damage (UMPD) coverage.
  • Comprehensive. This is the highest level of car insurance coverage there is. Comprehensive vehicle insurance includes all the benefits of mandatory insurance, as well as protection against fire and theft. This also covers the cost of storm damage, flooding, hail, vandalism and much more.

Understand car insurance terms: A-Z glossary

How much coverage do I need?

  • Meet your state’s minimum requirement. Check what’s required by law for you to drive.
  • Check loan requirements. Getting a car loan often comes with extra coverage requirements, and you might want to add gap coverage too.
  • Add extra coverage for you and your vehicle. Consider the most likely claim scenarios. Older cars might need collision and liability only. Drivers in high theft or extreme weather areas might add on comprehensive.

What about family car insurance policies?

You might want to consider joining your parent’s car insurance policy instead of taking out your own. You could also look at getting coverage through a joint policy if you share a car with roommates. You can do this by adding new drivers to an existing policy or by selecting multiple drivers when taking out a new policy

Family policies refer to joint car insurance policies that are specifically designed to cover multiple drivers in the same household, even if the drivers all have different experience and risk levels. These policies tend to be more expensive than single policies, but may be a more cost-effective way for new drivers to get coverage when everyone’s driving the same car. Family policies still come in the same varieties, with similar types of coverage.

You should compare joint and family car insurance policies in addition to other options to pick the one that meets your needs the best. Remember to look at the individual merits of specific policies and providers, and not just policy types.

How much will I pay for car insurance?

The cost of car insurance depends on your vehicle, driving record, location, level of coverage and other factors. Consider both your monthly payment and your deductible in case you need to make a claim.

  • The premiums. These are the regular, ongoing costs of holding a policy. Typically payable annually, monthly or fortnightly.
  • The deductible. This is a flat sum that you must pay whenever you make a claim. If your total deductible if $500, for example, then you will need to pay $500 before you can make a claim under your car insurance policy.

Car insurance companies set their premiums, or the cost you pay for coverage, based on factors that have been proven to make a difference to claim rates. For example, you might receive a discount for having a car alarm installed or for driving an electric car.

Premiums are higher for younger drivers because the chances of them being involved in an accident are statistically higher. To make matters worse, under-25 drivers are also statistically more likely to be speed offenders, which means accidents involving young drivers are more dangerous and more likely to happen.

Others factors include whether you park on the street or in a garage, how easy is it to repair, whether you have any car modifications and more.

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How is the deductible determined?

The total amount of the deductible can be split into different types of coverage. You’ll typically be able to choose a higher base deductible for lower premiums or a higher deductible for lower premiums.

  • Collision deductible. This is the deductible for a car accident or collision.
  • Comprehensive deductible. This deductible covers nearly everything else if you’ve elected to have this coverage.

The cost of premiums will usually stay at the front of your mind, while the deductible fall to the back. However, it’s important to keep both in mind because the cost of the deductible is a big part of actually getting value for your money from your car insurance policy.

For example, if your deductible is $1,000, you’ll enjoy lower premiums than setting a lower deductible. But if your car is in an accident, could you afford the $1,000 to pay for car repairs right away? Do you have access to another car, or would you have to rely on expensive cab rides or a rental car?

Deductible v. premium savings

Helen is weighing increasing her deductible to save on her monthly car insurance premium.

She’s a safe driver, with a newer Subaru Outback she drives less than 5,000 miles a year. Her current deductible is $500. She can save $100 per month on her premiums by increasing her deductible to $1,000.

She decides to increase her deductible to $500 and put aside the extra $100 she’s saving each month. With her new car emergency fund, she sets up automatic transfers to save $100 every month. Helen’s goal is to save at least $1,000 so she’ll be covered for any repairs until the deductible kicks in.

Example car insurance costs broken down for new drivers

If you’re a new driver, your car insurance prices will be determined a bit differently compared to someone who is renewing their car insurance or switching policies. Consider this example:

Bill is 21 and Ted is 41 years old. Both are taking out a new comprehensive car insurance policy from the same insurer, for the exact same type of car.

  • Bill has just gotten his license and is insuring his first car. He parks on the street and is paying his premiums monthly.
  • Ted is an excellent, experienced driver. He’s paying premiums annually instead of monthly, and parks in a securely enclosed garage.
  • Bill’s quote. $1,800 per year, $800 total deductible
  • Ted’s quote. $1,000 per year, $600 total deductible

To find out why there is such a substantial difference between the two quotes, Bill and Ted separately phone the insurer to ask for a price breakdown and then compare the differences. Their base costs start the same, but the total costs end up being very different.

Bill, age 21Ted, age 41
No-claims bonus$0-$150 per year
Driving record$0+$50 per year
Parking+$50 per year-$100 per year
Monthly payments+$50 per year$0
Total cost$1,800 premiums, $800 deductible$1,000 premiums, $600 deductible
  • Experience. As a new driver, Bill gets additional costs on top of his age-related increase while Ted’s prices are unaffected. When Bill has proven his driving ability, this penalty will decrease, typically when he reaches age 25.
  • No-claims bonus. Bill does not get a no-claims bonus because he has no driving history, while Ted hasn’t made a claim for several years and is getting a discount for it.
  • Driving record. Bill has no driving record yet and is therefore not getting any bonuses or penalties for it. Ted has a driving record, but also a history of speeding and parking tickets, which increases his price.
  • Parking arrangements. By parking in a secure garage instead of on the street, Ted is paying $150 less per year than Bill.
  • Premiums payments. Bill can’t afford to pay premiums annually and is instead doing it month to month at a total additional cost of $50 a year.

Despite getting the exact same type of insurance policy for the exact same type of car, Bill and Ted are facing very different costs.

6 ways to save

If you aren’t following any of these steps, it’s safe to say that you’re paying more than you have to.

  • Picking a cheap-to-insure car. Consider this before buying your first car and you can reduce your insurance costs before even taking out a policy. As a general rule of thumb, the cheaper, safer, greener and more common it is, the less it costs to insure.
  • Maximize discounts and buy online. Many insurers will offer a discount of 25% or more simply for buying your car insurance policy online. Also, many deals and discounts only work for online signups. Make sure you’re taking advantage of all the discounts you’re entitled to.
  • Compare policies regularly. Price creep is an unfortunate feature of some car insurance policies. Pay attention to your renewal notices, check whether your prices are increasing for no apparent reason and don’t be afraid to shop around for a new insurer.
  • Maintain your vehicle. Insurers may reserve the right to refuse a claim where damage could arguably have been the result of regular wear and tear or poor maintenance. Keeping your car roadworthy and in good condition is a good idea to save on your insurance, not to mention to prevent an unexpected breakdown.
  • Nominate your drivers. The cost of your policy is largely determined by the most at-risk driver on it. For example, if you’re a new driver with a clean record, it might cost you a disproportionate amount to include a driver with a history of speeding tickets or traffic infringements on your policy.
  • Vary your deductible. Many insurers will give you a variable deductible option, which essentially lets you choose your own deductible. Opting for a higher amount can get you considerably lower premiums, while opting for a lower deductible can cost less in the event of a claim, but more in premiums.

These are just some of the more significant discounts you might find, but there are many others as well. Look at more ways to save, or start comparing policies online if you’re ready to start looking at options.

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Andrew Munro

Andrew writes for finder.com, comparing products, writing guides and looking for new ways to help people make smart decisions. He's a fan of insurance, business news and cryptocurrency.

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