McAfee Secure sites help keep you safe from identity theft, credit card fraud, spyware, spam, viruses and online scams

Auto Insurance and Buying a Car

Auto insurance and buying a car are closely connected expenses, even if many drivers do not spend much time thinking about that connection until they have the new car keys in their hands. Auto insurance is one of the somewhat hidden expenses related to new car ownership. When policy holders are car shopping, they ought to pay mind to the insurance costs related to any vehicle they choose prior to signing on the dotted line and taking a vehicle home. This expense has to be factored in with all the others so that we can get a realistic sense of the total cost of auto ownership. Taking the time to consider auto insurance when they're shopping for cars will help drivers to stay within their overall budgets. It can also save them from unpleasant surprises when the policy premium comes due.

If you are trying to squeeze a sports car or high end SUV into your budget and are shopping around based on the monthly payments you'd have to pay for each vehicle you're considering or the auto insurance requirements in your state, you're only getting part of the picture. The vehicles drivers look at that sit on the very edge of what they can afford may prove to be too much to afford when auto insurance is factored in. High performance vehicles tend to be very expensive to insure. For those of us who are trying to buy one of these vehicles for the first time, the cost of insurance can be very surprising. It is very important to look into this part of the overall cost of auto ownership right along with the monthly payment (as well as the monthly fuel cost and other hidden expenses). A savvy insurance consumer and car buyer will do some homework and look into these details before driving a car off the dealer lot.

State Mandated Auto Insurance Coverage

There are certain auto insurance laws on the books in every state across the country. Each state is different, however, so it is impossible to generalize and make any kind of blanket statement that pertains perfectly to every specific state and coverage scenario. However, liability protection is generally at least part of what is required. The specifics of what your home state mandates are easy to find. Just check with the insurance department or department of motor vehicles for your state either online or over the phone, and you can get a rundown of what's required where you live.

Of course, most auto insurance experts recommend that drivers carry more than the legal minimums for liability insurance on their personal auto policies. The minimums required by most states are relatively low. The limits of coverage drivers can legally carry are often not enough to handle all the costs of an at fault accident. This is especially true of medical expenses. For one thing, the cost of medical care has gone up tremendously through the years, and in many states minimum auto insurance coverage is only revisited in the legislature once every few decades or so. But for another, people tend to be sue happy when it comes to auto accident injuries. Civil cases can turn small or medium claims into huge ones when juries award massive settlements to injured victims in auto accidents.

Auto Insurance Third Party Coverage

In the auto insurance industry, auto liability insurance is sometimes referred to as third party coverage. This is in reference to the relationship created by the signing of an auto insurance liability policy by an insured driver and an insurance company. The insured driver is the first party and the second party is the company insuring that driver against risk. As you would expect, the third party is the injured individual or the person owning damaged property affected by an accident that may lead to a civil liability suit. Auto liability insurance provides protection for the policy holder or first party against the risk of an accident with a third party that leads to financial damages. Third party coverage, then, is a financial hedge against damages caused by contact with a third party in an at fault collision.

Physical Damage Auto Insurance

While auto insurance liability coverage is third party protection, physical damage coverage provides first party protection for covered policy holders. In other words, it protects the covered vehicle against property loss in a range of different circumstances. Unlike third party coverage, first party physical damage protection is not required by state laws. However, drivers who finance or lease their vehicles are typically required to carry first party physical damage protection as part of their lease or purchase agreements under the terms of these agreements.

When buying a car, both required and optional areas of coverage should be explored to ensure your coverage meets your needs.


FREE Quotes, Multiple Insurers

Zip Code