Car Insurance Guide for New Drivers: Understanding Coverage and Costs
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Car Insurance Guide for New Drivers: Understanding Coverage and Costs
Congratulations, you’ve passed your driving exam and are ready to drive your first car! You’re probably excited about the convenience and freedom that comes with owning your first vehicle.
At the same time, you may feel confused or overwhelmed choosing the right car, getting a loan and then purchasing car insurance.
For many new drivers, everything about car insurance gives them a headache. However, you can’t avoid the topic of car insurance. As a matter of fact, it’s illegal to operate a vehicle in Jamaica without car insurance.
In addition, some unscrupulous individuals prey on the ignorance of new drivers and defraud them of money.
At the same time, you may choose an insurance plan that does not suit your needs and costs you excessively in the long run.
Therefore, it’s in your best interest to educate yourself on the basics of car insurance so that you can choose the best insurance provider for you.
Here’s the ultimate car insurance guide for new drivers so you can make an informed decision when it’s time to buy car insurance.
Understanding Car Insurance Basics
First, let’s define car insurance.
According to Investopedia, car insurance is a contract between you and an insurance provider in which you agree to pay a premium in exchange for protection against financial losses from an accident or other damage to the vehicle.
In other words, if you end up in a car accident, depending on your insurance policy, your car repairs, medical bills and the car repairs and medical bills of the other party would be covered. The alternative to that is paying everything out of pocket which can be extremely costly.
For example, if you cause an accident while driving, you will be responsible for any medical and repair costs for yourself and anyone directly affected by the accident.
Car insurance is also essential in cases of car theft. If your vehicle is stolen and you have a policy that covers theft, you will be compensated for your loss. However, if you don’t have car insurance, you will be responsible for the entire cost of replacing your vehicle on your own.
Whether or not you buy car insurance is not a personal choice, it’s required by law to have at least third-party coverage. If you’re caught driving without insurance, you can be fined.
Another important term to learn is insurance premium. Insurance premium can be defined as the amount of money you pay for an insurance policy. Your insurance premium is calculated due to several factors that we’ll discuss in a subsequent section.
Finally, you need to know what a deductible/excess is. A deductible can be defined as the amount of money you have to pay before your insurance provider pays a claim or covered expense. You can choose a higher or lower deductible based on your budget or needs.
Types of Car Insurance Coverage
Before you purchase car insurance, you should know the various types of car insurance coverage options out there. By learning them, you can make a more informed choice when picking the best coverage for your budget and needs. Here are some types of car insurance coverage you may want to keep in mind:
- Liability Insurance- Liability insurance, also called third-party insurance, protects you if your car damages someone else’s vehicle. Liability insurance does not cover damages to your car.
- Comprehensive Coverage- Comprehensive coverage provides coverage for your vehicle and damage to someone else’s property. This type of coverage also provides you with protection in the event of bodily injury or death to other persons.
- Third Party Fire and Theft – With our Third Party, Fire and Theft Policy, you’re covered in the unfortunate case of a fire or theft in addition to protection against losses due to damage caused to someone else’s vehicle.
Factors Affecting Insurance Premiums for New Drivers
Insurance premiums are calculated based on several factors and therefore, you’ll probably have a different figure than your friends or family members. Here are some factors that affect insurance premiums for new drivers.
Age and Driving Experience
It’s no secret that new drivers tend to pay more money for their insurance premiums than older more experienced drivers. Insurance providers see young or new drivers as risky since they tend to meet into more accidents and therefore submit more claims.
According to the Jamaica Gleaner, “In Jamaica, there have been more than 200 road crashes attributed to inexperienced drivers over the past 30 years. Fifty per cent of these crashes have been caused by persons driving for less than five years.”
However, as you age and get more driving experience, you may notice that your insurance premium decreases.
Vehicle Type
The type of vehicle you get affects the overall cost of your insurance premium. If you opt for an older, budget-friendly vehicle with good safety ratings, you’ll likely pay less in insurance premiums. An older car has less value and may cost less to repair due to the availability of parts.
However, if you opt for a newer model or a luxury brand, your premiums may be higher. Newer cars or luxury vehicles have a higher repair cost and have a greater value.
In addition, a larger car, which is seen as better able to withstand a crash may cost more to insure than a smaller vehicle.
Finally, if you own a car with a high theft rate, your insurance premium may be higher. Cars with high rates of theft in Jamaica include: Corolla Axio, Nissan AD, Tiida, Voxy, Mark X, Probox and Succeed.
Location
Your location could factor into the final cost of your car insurance premium. For example, if you live in an area with high rates of car theft, unfavourable road conditions and densely populated, you could end up paying more for your insurance premium.
Your premium is higher because you’re more likely to make a claim living under those circumstances. For example, if you live in a densely populated area, such as a city or a town, there are more cars on the road and the likelihood of a car accident is higher.
In contrast, a less populated area with fewer cars has a lower chance of a collision.
Driving Record
Your driving record is one factor that your insurance provider examines when calculating your premium.
If you have an excellent driving record, meaning, no accidents or claims to your insurance company, you’ll likely have a lower premium.
On the other hand, if you frequently meet in accidents and make claims to your insurance company then your premium would likely increase.
Tips to Reduce Insurance Costs
Even though car insurance costs are usually higher for a new driver, there are ways you can reduce the costs, save some money and protect your car. Here are some recommendations to consider.
Choose a Safe and Reliable Vehicle
When you’re choosing a car, we recommend opting for cars with high safety ratings, and reliable and lower in insurance groups such as a Honda Fit. You can add anti-theft systems such as a tracker and alarm to save even more money on your insurance premium.
Have a chat with various insurance providers and ask them about cars they deem safe and reliable to help you make your decision.
You can increase your voluntary excess or pay a higher deductible. Agreeing to pay a higher excess can reduce your premium but it will increase your out-of-pocket expenses in the event of an accident.
Add an Experienced Driver
One way to lower your premium is by including a responsible driver on your policy. However, you have to be careful because ‘fronting’ is illegal.
It would be considered ‘fronting’ if you name the experienced driver as the main driver of the vehicle to save money on your insurance. However, it’s perfectly legal to add them as a secondary driver.
Limit Mileage
Your car mileage has an impact on the value of your car and by extension your car insurance premium. Therefore, if you want to lower your premium, consider driving fewer miles.
Driving fewer miles reduces your likelihood of being involved in an accident and it reduces the deterioration or wear and tear of your car. Insurance providers therefore see you as a lower risk to insure.
As a new driver, you may be more prone to insurance pitfalls than more experienced drivers. Here are some common pitfalls to avoid when buying car insurance.
- Falling for Insurance Scams- Naturally, you want the best price but there could be a catch. Be cautious of deals that seem too good to be true; always verify the legitimacy of the insurance provider. You can check out the Financial Services Commission website to see the list of regulated insurance companies.
- Not shopping around- It’s important to shop around and talk to various car insurance providers until you find the one who meets your needs. Otherwise, you can run the risk of spending more than you need to or have inadequate coverage.
- Picking the wrong coverage- While it can be tempting to purchase the lowest-cost policy, which is usually third-party liability insurance, you could be missing out on other policies that suit your needs better. Consider which policy would be the best for you based on your unique circumstances. It could save you in the long run.
Car insurance is a great and necessary investment for all new drivers. Car insurance is designed to help you pay for expenses in the event of an accident so that you won’t have to spend an exorbitant amount out of pocket.
Make sure you compare policies and costs and choose the right one based on your unique circumstances. While your premium may be higher now, keep being a safe driver and you’ll likely see your premiums fall over time.
If you’re looking for an insurance provider who has the best interests of new drivers at heart, reach out to AutoSmart. We have a special AutoSmart Young Motorist/Previous Claim Product ready and waiting for you. Let’s chat.