Question: I’m looking to buy a car. Do car insurance policies change according to the car? Do the rates?
Answer: Yes, to both questions. The vehicle you purchase and how you pay for it will affect your car insurance policy and rates. This is why you need to estimate car insurance costs as part of your car-buying process.
What is needed as part of your car insurance policy will change depending upon the exact vehicle you purchase – and how you paid for it. The rates will vary due to the make, model and year of the vehicle being insured, as well as what coverages you choose.
Owned, financed or leased
If you buy your car outright, you can place whatever coverages you want on it as long as you at least comply with your state car insurance minimum requirements.
If the car is financed, then your lien holder will require you to carry physical damages of collision and comprehensive since it wants its asset, the vehicle, protected by your car insurance policy.
If you lease a car, you’ll be mandated to include comprehensive and collision coverage on your policy as well as carry higher liability limits of $100,000 per person and $300,000 per accident for bodily injury liability and $50,000 for property damage liability (100/300/50). This is due to the car being titled in the leasing company’s name.
Thus, how you pay for your vehicle will dictate the minimal amount of car insurance you can buy.
The car itself
The type of car you buy will also determine what coverages you should buy. If it’s new, you’ll want different coverage on it than a car that is 10 years old.
A new car, even if you buy it outright with cash, should have physical damage coverages of collision and comprehensive coverages. You can't afford to write off a car so valuable.
You could hit something yourself. You could get hit by an uninsured driver. A tree could fall on the car. Without these physical damage coverages, you could end up paying for the repair costs or even total loss of your vehicle.
If you buy a used vehicle that is much older, you may be able to get by with just liability coverage. You don’t want to pay for collision and comprehensive on a vehicle when the coverage premiums cost more than your vehicle’s fair market value.
The specific model vehicle you buy is also taken into account by the car insurance company and its rating system. Your car insurance rates will be higher for a high-powered, high-dollar vehicle than a modest four-door sedan.
Comparison shopping for any car
As you shop around for a car to buy, it’s important to first determine what car insurance coverages you want on the policy and then compare car insurance rates for the various vehicles you’re thinking of purchasing.
Because each insurer has its own way of weighing various rating factors (where you live, annual mileage, driving record, etc.) and calculating rates, comparison shopping with multiple providers will allow you to see which car and car insurance company will give you the cheapest rates.