When researching a specific car model, it’s important to understand its long-term costs. Many reviewers can give you a good idea of which models are prone to failure, a specific model’s fuel economy, or how long its warranty lasts, among other cost-related factors. Insurance is another variable cost that can significantly affect your total cost of ownership and the car buying process. And before you sign a finance agreement for a used or new car, you might want to call your insurance company and ask a few key questions.
Contact your insurance company
What? You do not have a current insurance policy. If not, you should update your policy as soon as possible. In all 50 states, it is illegal to drive without insurance. And if you have an accident, you are responsible for all repair costs and damages. If you injure someone else without insurance, you could face costs that could put you out of business.
Even if you don’t have an accident, the longer your insurance policy is out of date, the higher your premiums can potentially be. Insurers don’t like to see drivers whose history includes faults in their policies because they consider them a higher risk. Maintaining a policy consistently signals to an insurer that you are likely following other good habits and are less likely to have an accident. An outdated policy signals the opposite and will lead an insurer to charge you higher rates in the future.
Your insurance company can also be a great resource for you when it comes to a new car. After all, they insure hundreds of models for thousands of drivers. According to Erie Insurance, calling an insurance representative before you go to the dealership is a prudent step to make sure you’re buying the right vehicle.
What should you ask your insurer before buying a new car?
If you want to get an idea of your long-term ownership costs, the first question you should ask yourself is how much it will cost to insure the vehicle you’re considering. Insurers base their rates on several factors, including the likelihood of you filing a claim and the likely size of that claim. So your insurer may charge you more to insure a vehicle with notoriously poor reliability and a history of recalls. They may also charge you more if you buy a higher-end vehicle because future repairs will be expensive.
You will also want to ask if buying a car will affect your rate. Generally, it depends on the type of car you are buying. In addition to cars with reliability issues and high end cars, newer models generally cost more to insure as they often cost more to repair. But older cars with a bad track record can also drive up your premiums. You’ll want to get in touch with your insurance agent and the specific two or three models you’re considering to understand how buying one might affect your rate.
Another question you’ll want to ask is whether you qualify for an auto rebate. This is not only a question you will want to ask your insurance agent, but you will also want to dig into yourself a bit. There may be affiliate programs that you are a member of that the insurance representative does not immediately mention, perhaps because they do not appear on their system quickly. Also consider whether the discount is effective for a specific period or for the life of the policy, which will affect your total cost of ownership.
Other key questions to ask your insurance agent
Ask your insurer how the difference between the estimates for parts and labor and the actual work for parts and labor is handled. Often drivers have been stuck with a labor or parts bill that deviates from the estimate your repair shop submitted to your insurer when you first contacted them, especially if you are buying a new state-of-the-art car with unique components. Although additional work may have been required to repair the vehicle, you will want to have a clear understanding of how these deviations are handled.
Find out if buying your new vehicle will cause any coverage gaps. Again, insurers don’t like to see gaps in coverage. And while your insurer can’t raise your rate based on a coverage gap of its own creation, an insurer you use in the future can.
Also ask what type of coverage you need, especially if you purchased your coverage some time ago. There may be passengers you no longer need – or those you do need. Either could affect your premium amount, so it’s a good idea to review your coverage before doing anything that could affect it.
Finally, you need to be clear about what you will receive if your new car sells out. Typically, insurers pay either an agreed value or the actual cash value (less any depreciation). Understanding what you will receive upfront will potentially save you heartache later. And if there’s a big gap between what you think either number will be and what you’re paying for your new vehicle, you might want to reevaluate your purchase, your insurance, or both.
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