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Car Insurance for New Vehicles

The cost of car insurance for new vehicles is almost always a concern for drivers who have just bought a new car, truck, or SUV. But truthfully, we ought to attend to this important detail as a part of the process of deciding what kind of vehicle to purchase in the first place. There is no getting around it: auto insurance for new vehicles costs more than it does for older ones. For one thing, we have to carry more coverage on new vehicles. And for another, insurers are protecting more-newer cars and trucks are worth more than older ones. It stands to reason that paying higher prices is inevitable.

But this does not mean you have to bury yourself in high auto insurance premiums just because you are purchasing a new vehicle. Car insurance for new vehicles is itself a major purchase, one you should plan for and do some thinking about before you ever write a check for coverage. Having a broader understanding of car insurance and its role in the total financial cost of a new vehicle helps auto shoppers not only pick out more economical cars, but also better insurance coverage that provides more value.

Drivers Must Have Auto Insurance

Whether your vehicle is old or new, you must have auto insurance to legally drive on the road. This is true in virtually every area of the country. The different states all have different specific ways of looking at auto coverage, but they all have some sort of requirement for carrying auto liability insurance. So if you are an auto owner, you know right from the get-go that you are in for at least an auto liability policy.

But for new vehicle owners, the situation can get a little murkier. States do not have many specific provisions in their car insurance law books dealing with financed vehicles and the extra need for coverage drivers may have as a result of the ownership status of these vehicles while they are being paid off. However, lien holders generally go further than most states will, by requiring certain types of coverage for cars being financed or leased.

Auto liability coverage essentially protects the covered driver financially, but provides no protection for the covered vehicle. As a policy holder with liability coverage, you are protected from bearing direct financial responsibility for the costs of medical care and property repairs or replacement that come about in the aftermath of an accident. In an auto liability policy, there are separate provisions for bodily injury and property damage coverage. Still, auto liability insurance does nothing to protect your new car or truck in the event of an accident or any other claim event. When you purchase a new vehicle, liability protection ought to be just one part of the overall auto protection package.

Collision and Comprehensive Auto Insurance

Although state car insurance law does not mandate collision and comprehensive insurance (or generally any coverage beyond liability protection), these two areas of coverage are necessary for many drivers nonetheless. If you are leasing a vehicle, or if you are financing your new car purchase with a bank or other lending institution, you will need to carry collision and comprehensive to protect the lender's investment in the vehicle-and yours as well. Collision and comprehensive are both very useful to new car owners, so the fact that you may be forced to add them to your auto policy is really not a tragedy. True, they will add to the cost of your policy, but they will also greatly increase its value to you if you ever run into a claim situation.

Collision auto insurance protects you as a policy holder from the cost of repairing or replacing your covered vehicle following an accident. It is a type of insurance specifically set aside for only this type of situation. Collision insurance pays out after an accident, regardless of who was to blame in the collision. This means that if you are liable, you can still make a claim on your collision and not be left with nothing if your vehicle is badly damaged or totaled.

Comprehensive auto insurance is another form of coverage you really want to have when you own a new car, truck or SUV. It provides protection against loss due to a wide range of circumstances. For example, if your vehicle is stolen, your comprehensive coverage would be the portion of your policy to file a claim against. If your car is damaged in a hail storm while it is parked in your driveway, or if it is keyed or otherwise vandalized, comprehensive coverage protects your car in these types of circumstances as well.

Other New Car Insurance Options

Auto liability is a staple item on any car insurance policy. Collision and comprehensive insurance provide a great deal of value in terms of protection supplied when measured against the money they cost. Another new car insurance option many drivers take advantage of is gap insurance. Gap insurance, also known as guaranteed asset protection, takes care of your financial obligation to a vehicle rather than protecting the vehicle directly. If you get into an accident and your new car is totaled, your gap insurance kicks in as needed.

The purpose of guaranteed asset protection in your car insurance for a new car is to protect you financially in the event of a total loss. Gap insurance is really only useful if you are financing your vehicle and are upside down. Being upside down simply means owning more money than what a car is worth, or owing more than its actual cash value or fair market value. Collision insurance only covers your new car up to its fair market value. As the car depreciates, so does the upper coverage limit of collision insurance (as well as comprehensive insurance). Oftentimes, car buyers are upside down in the early stages of repaying their obligations on an auto loan, because early depreciation on new vehicles is so pronounced, whereas the payments you make on a loan are steady and small, often spread out over several years. In some cases you can be upside down in terms of your equity for over half the length of your loan.

If you get into an accident before the new car is paid off, and you owe more than it is worth (that is, more than the insurance company will give you), you need gap insurance to take care of your additional financial obligations to your lender. Just because you total a car does not mean you get out of your obligation to pay for it. Collision insurance will pay the fair market value of the car minus deductible. A gap insurance endorsement on your new auto insurance policy will bridge that gap between what you owe and what your collision insurance will pay in the event of a total loss.

Car insurance for new vehicles can be an expensive item to buy. You should know all your options, as well as all your insurance obligations given your purchase situation. Find out how much coverage you want and need, and shop around for the best deal.

 

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