Insuring a new car: steering through the options

You’ve just bought a brand new car and can’t drive it off the lot until it’s insured.

But this is new territory for you, and you’re not keen on having to pore over the fine print.

Before choosing, it is important to know how the various insurance policies proposed to you are priced. This will put you in a better position to make an informed decision.

How insurance premiums are set

Insuring your vehicle protects you against any damage it might suffer, and certain risk factors will be used to determine the cost of your insurance. You have influence over some of these factors, while others, unfortunately, are out of your control.

Vehicle model: Of course, the more your vehicle is worth, the higher your premium will be, as you’ll need to insure its overall value.

Vehicle type: Aside from the model itself, some types of vehicles (sports cars, for example) automatically carry higher premiums. Statistically speaking, sports car drivers have a higher chance of being involved in an accident.

The driver’s age, sex and experience: Based on statistical reports, insurance companies advise us that people under 25 submit more auto insurance claims than other age groups. Also, more men than women tend to call on their insurers. Experience is also a factor. You may be 40, but if you’ve just received your first driver’s license, your premiums could be higher.

Place of residence: The sad reality is that urban drivers are more likely to submit auto insurance claims for vandalism or an accident. Premiums are therefore set not just by city but also by neighbourhood.

Driving record: This one may seem obvious, but it’s good to remember that drivers who make several claims will see their premiums go up. Other aspects of a driving record, notably license suspensions, will have a direct impact on the price paid to insure a vehicle.

Deductible: This is the amount you’ll have to pay in the event of a claim before the policy takes over. The higher the deductible, the lower the premium.

There’s more

Premium costs: The cost of your premiums will vary based on the type of insurance you buy. For example, if you decide to purchase liability insurance only—commonly known as being insured “on one side”—you’ll spend less, but you won’t be reimbursed if your vehicle is damaged as a result of an accident.

Replacement insurance: Available for the early years of a car’s life, replacement insurance covers the full cost of replacing the vehicle with an identical new one. If you don’t take this option, you’ll receive the replacement value of your vehicle, less its depreciation.

Rebate programs: Be sure to ask your insurance company whether it offers rebate programs. An ignition interlock system, an automobile club membership and age are all factors that can earn you a lower premium.

Usage-based reductions: Your insurance premiums can often be reduced either through low annual mileage or the real time monitoring of your driving habits using on-board technology.

To learn more, ask the Finance and Insurance Manager at your local dealership or your insurance agent to provide you with the details that apply to your situation. For more tips on financing a vehicle, visit Kijiji Autos.