“If I knew then what I know now.”
How many times a year do we all say that as we grow older? Sadly, for most of us, wisdom only comes at the cost of our youth. If I could write my 18-year old self an article on how to buy car insurance for the first time I would likely have saved myself thousands of dollars during a period of my life when I needed it most. Just think about what those compounded savings on a car loan or a mortgage would have looked like, or even how a basic investment account could have grown with compounded monthly contributions from all the money I would have saved. I also would have likely been better insured, and far less clueless when I stepped inside the insurance office for the first time.
I can honestly still remember my first time buying car insurance. I stepped into this busy office where everyone seemed so much smarter than me, and after waiting for a brief time, I tentatively approached the docket and sat down. The man across the table from me looked to be in a semi-rush and he gruffly stated, “So young man, do you want comprehensive, 3rd party liability, or just basic accident insurance and we recommend a $200 deductible so I assume that is what you want?” I had really no idea what these terms meant.
My parents had told me to go down to this insurance office, because apparently they had good service there in the past, and they told me, “All those places charge roughly the same, and you have to have insurance, so just go down there and get it done.” Needless to say, I didn’t really know how to reply. The man across the table looked a little exasperated, and then he set in on me in order to get the most beneficial deal for his company that he could (which was his job after all). I mutely nodded and agreed with what seemed like good common sense. When he told me that I didn’t want to be caught with a big deductible in the case of an emergency accident, I didn’t question the increased premiums. When he stated so confidently that I needed every type of insurance that they offered, I never thought of arguing. Even when the salesman/insurance agent neglected to tell me of any discounts that might be available at some point, I didn’t bat an eye lash. If only I could see that fellow again…
The first thing you need to be aware of if you’re wondering how to buy car insurance for the first time is the different terminology involved. In most of the Western World, car insurance is no longer optional. The one thing my parents were right about was that I did need car insurance in order to drive the car that I had purchased. The question becomes, what level of insurance do you want to be covered for. Here are a few car insurance terms to familiarize yourself with before heading down to negotiate:
Deductible: There are two main types of ways that you will likely pay a car insurance company. The first is the deducible. When you get into an accident and/or make an insurance claim, you have to pay a cost (and possibly the other driver’s as well). Most deductibles are between $200-$1000. If you never make an insurance claim (lucky you) you will never pay this fee.
Premium: The premium is the amount you pay every month, quarter, or year, depending on what option you choose. The insurance company takes this money invests it, and then uses it to pay for peoples’ insurance claims. The larger the deductible risk you are willing to assume, the smaller premium you pay.
Comprehensive: This is an optional form of insurance that his highly recommend for most people. It protects you against events such as vandalism and theft.
Accident Insurance: This pays for all the medical costs for either party in the result of a motorized accident. In most places this is not optional.
3rd Party Liability: This is the insurance that covers you when the vehicle injures someone or damages their property. It is not optional in most countries, and is actually written into the basic laws of countries such as Canada.
The next thing you should realize is that there are a plethora of discounts available for many drivers out there. Now if you are a fairly young driver most of these probably won’t apply to you anyway (especially if you’re a male and own a sports car), but there is an interesting option available if you are in your parents’ good books. Most places will allow parents and children to transfer ownership of vehicles back and forth to each other without significant paperwork. If you register your vehicle in your parents’ name, they are much more likely to have a great driving record and will automatically get access to more discounts. Much of this stems from the fact that people who are older than say 40 years old have significantly lower risk of getting into accidents and making a subsequent insurance claim. Some other discounts that are commonly available are multi-vehicle (if you have insurance on multiple vehicles with the same company – kind of like a bulk buy discount), multi-insurance lines (if you have multiple types of insurance with a company), anti-theft (most companies will give you a break if you can prove you have installed anti-theft devices in your car because there is less change of you making a stolen car claim) and an auto club discount (such as CAA). Since your parents likely have many more assets to insure than you do, they will likely qualify for more of these discounts, in addition to automatically receiving a more beneficial rate.
Finally, when consider how to buy car insurance for the first time it is extremely important to realize that everything is negotiable! As you can tell from my first time experience, I didn’t put much effort into comparing rates before I purchased car insurance for the first time. Just as I would never fault a salesman for trying to sell me a product, I would never fault a consumer for trying to get the best deal. Let insurance companies compete for your business. You could be very lucrative lifetime customer of theirs if they make it worth your while, so make sure to pitch it that way.