Insuring New Car Models: Everything You Need to Know
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By, Content Director
New cars cost more to insure because they have a higher market value than old cars. This higher value means that the actual cash value (ACV) is also higher. Insurers face more risk with new cars because they'll pay more to replace them than they would with an older car.
If you're buying a new car, consider getting collision and comprehensive insurance. These coverages, also known as full coverage insurance, help pay for repairs and can even replace your car, which can be beneficial as new cars are more expensive to fix. If you're financing the car, think about gap insurance. It can cover the difference between what you owe on your loan and what your insurance pays if you have an accident.
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Car insurance for a new vehicle is typically more expensive due to the car’s high value. However, some new car models are more costly to insure than others.
On average, the 2022 Subaru Forester is the cheapest new car model to insure at $1,291 per year. The 2022 Audi R8 is the most expensive to insure at an average cost of $3,741 per year.
Getting full coverage — which includes comprehensive and collision insurance — may be best for new cars. If your vehicle is leased or financed, consider gap insurance.
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How to Get Insurance for Your New Car
To pick the right car insurance, start by gathering key details like your age, job and the type of car you have. Then, decide how much coverage you need and get several quotes, either online or through an insurance agent. Compare offers from different insurance companies to find the best deal.
Prepare the necessary information
The first thing you have to do is gather the information you need to get a realistic new car insurance quote. These include your personal information like your:
- Employment details
- Driving record
- Credit score
- Insurance history
It also includes information about your car, including its:
- Make and model
- Vehicle Identification Number (VIN)
Determine how much coverage you need
Considering your individual insurance needs is key to determining how much — and what type of — auto insurance to buy. Check your state minimum coverage requirements and assess if they’re high enough to pay for damages to your vehicle if you get into an accident. For broader coverage and protection — which is especially important for newer, high-value or leased cars — getting full coverage may be necessary.
Get a quote
Many insurers allow clients to get insurance quotes online on the same day, but you can also use MoneyGeek’s car insurance calculator for an anonymous car insurance quote. You may also opt to talk to a captive agent or insurance broker if you’re unsure about how much insurance you need and need personalized advice.
Shop around and compare insurers
Ask for new car insurance quotes from at least three insurance companies to estimate how much your premium will be. Compare policy offerings from these companies, including reward opportunities. It's also a good idea to check the companies' level and quality of customer service.
Buy a policy
After looking into your options, the next step is to decide which policy to buy. Discuss the payment terms with your insurance agent. Make sure you read and understand the policy before finalizing your purchase. Making your first payment — monthly or lump sum — typically activates your policy. Your insurance provider should send you your proof of insurance soon after.
If you already have an insurance policy, you'll be covered the moment you drive off the lot. Your new car will typically have the same level of coverage as your old one, but you'll need to make the right updates to your policy:
- Add your brand new car to your insurance: This option lets you include your new car in your existing policy, keeping the protection you're used to.
- Transfer your insurance to your new car: Or, you might choose to move your current coverage to your new vehicle for a smooth transition.
Most drivers with an existing policy have a 30-day grace period to make these changes. During this time, your insurance will cover your new car just like your old one. But remember, if the grace period ends and you haven't added or transferred your car to the policy, you'll be driving uninsured, and that's not a road you want to travel.
So, reach out to your provider soon to make sure you're covered. It's a simple step that can save you from legal troubles or hefty fines down the line.
What Car Insurance Coverage You Need for a Brand New Car
Meeting your state's minimum car insurance requirements is a must when insuring your car, but it's often just the starting point. These mandated coverages, while essential, might not be enough to fully cover repairs or replace a brand new car if an accident occurs.
You'll need liability insurance in most state — except New Hampshire and Virginia — which covers bodily injury and property damage if you're at fault in an accident. Some states also require you to carry additional protections like personal injury protection and uninsured/underinsured motorist coverage.
In many states, you won't be able to register your car without the right insurance, and your dealership might ask for proof of coverage before handing over the keys.
Types of Coverage Available
What it Covers
Comprehensive coverage pays for the damages your car incurs after a non-collision incident like fire, vandalism or weather-related events.
Collision insurance covers damages to your car caused by a collision with another vehicle or object.
Gap insurance covers the difference between a car’s value and the remaining balance on the car loan if the vehicle is totaled. This coverage is typically required when taking out a loan to finance a car.
Personal Injury Protection (PIP)
Some states require PIP coverage. This insurance covers expenses you incur because of injuries from an accident, regardless of who is at fault.
Uninsured and Underinsured Motorist Insurance
Some states require uninsured and underinsured motorist coverage. With this, you get coverage for medical bills and car repairs if an uninsured or underinsured driver hits you.
Gap insurance protects against possible losses after your car is totaled and you still have a car loan. For example, say your new car is worth $25,000, and you still have a $20,000 loan balance. In the event your car it totaled, your car insurance will only pay for the ACV of your vehicle. If that’s $18,000, you’ll still be $2,000 short of paying off your loan. That’s where gap insurance comes in and pays that $2,000.
Mistakes to Avoid When Insuring a New Car
Overpaying for coverages you don’t need, signing up for the first quote you get or choosing the wrong deductible can lead to higher rates. And by not comparing enough quotes or asking questions, you may miss out on the best car insurance for you.
Purchasing too little coverage
Not many people end up not getting the right coverage when they focus on affordability alone. Some people might let go of comprehensive and collision coverage even though they are driving a new or high-value car, meaning they would have to pay out of pocket if their vehicle is totaled. When choosing an auto insurance policy, it’s important to find the right balance between affordability and coverage.
Buying unnecessary add-ons
Buying more coverage than you need is also possible, leading to higher than necessary premiums. Make sure you assess your insurance needs before choosing what add-ons to buy.
Lapsing in coverage
Insurance policies expire. Be sure not to let your insurance expire before you renew it and add your new car to your policy before the grace period ends to prevent an insurance lapse. Otherwise, you risk being fined or penalized for driving uninsured.
Failing to compare quotes
When looking for the best car insurance, MoneyGeek recommends comparing insurance companies and policy offerings from at least three different companies. Some companies offer lower rates than others. Get personalized quotes from at least three insurance providers to ensure you’re purchasing coverage from the company with the lowest rate.
Not asking clarifying questions
Make sure you understand all details, terms and conditions before buying a policy. Ask questions and clarify anything you’re unsure of. Doing this can help ensure you’re getting the right policy and rate.
Choosing the wrong deductible
Your deductible is the amount you have to pay out-of-pocket after filing a claim. Generally, having a higher deductible means a lower insurance premium. However, if you want to avoid a sizable bill after filing a claim, a plan with a lower deductible and higher monthly premium might be a better fit for your needs.
Sharing inaccurate information
Providing incorrect information can give the insurance company a reason to reject your claim or cancel your policy.
If you have an existing policy, you have until your grace period ends to add your new car to your policy or transfer your insurance to your new car. The grace period typically lasts for 30 days, depending on your insurance provider. If you’re buying a new car insurance policy, you need to purchase it before you pick up your car at the dealership.
What It Costs to Insure Your New Car
New car insurance can be expensive because of the high value of new vehicles. However, insurance costs can vary widely between car models. For example, the average cost of new car insurance for 2022 models is $1,739. Meanwhile, insurance for the cheapest 2022 car model to insure, a Subaru Forester, costs $1,291 per year, and insurance for the most expensive 2022 car model to insure, an Audi R8, is $3,741 annually. Luxury cars or sports cars are often more expensive to insure due to higher repair costs and increased risk factors.
Cars with higher safety ratings may be less expensive to insure, as they are considered less risky. New models with top safety features and ratings might even offset some of the costs associated with insuring a new car.
However, actual rates may vary depending on individualized factors, including your age, car make and model, location and driving history.
Factors That Affect Car Insurance Costs
Location-specific factors can affect the cost of your insurance. Insurance companies may consider the number of accidents, vehicle theft statistics and dangerous intersections in your ZIP code when calculating premiums. Each state has different car insurance coverage requirements, which can affect the cost of insurance. Maine has the lowest average auto insurance cost of $607 per year for a minimum coverage requirement, while Michigan has the highest average cost at $5,471 per year.
Car Make and Model
Car insurance premiums are different depending on the type of vehicle you own. For instance, sports cars are more expensive to insure than sedans.
Drivers with a clean driving record tend to have cheaper car insurance rates than those with speeding tickets, accidents or DUI charges.
The cost of auto insurance also varies depending on your age. For example, the average insurance rate for a 16-year-old with their own policy is $5,318 per year. In comparison, similar insurance costs an average of $1,246 per year for a 40-year-old.
Depending on your state, insurance companies may also use your credit score to determine rates. In these cases, having a higher credit score can help you get better rates.
Price varies by insurer. Generally, GEICO is the cheapest widely available company with an average annual rate of $1,047. MetLife is the most expensive at $1,686 on average.
While new car insurance can be costly, there are ways to reduce the cost of car insurance. MoneyGeek recommends:
- Shopping around. When looking for the best and cheapest car insurance policy, shopping around and comparing prices can help. Insurance companies have different quotes and offers. Consider getting personalized quotes from at least three insurers.
- Looking for discounts. Insurance companies also offer significant discounts for various circumstances. Some insurers give discounts to cars with safety features. You may also get a discount if you complete a defensive driving course.
- Choosing a higher deductible. If you want lower insurance premiums, you can opt for a higher deductible. However, keep in mind that raising your deductible means you'll have to pay more out of pocket if you file a claim.
While it's generally true that new cars are more expensive to insure than older ones, it's not solely about the car being new — the specific make and model, safety features, coverage options and other factors play a significant role in determining the insurance cost.
The best case scenario is that your insurance policy is set up before you leave for the dealership.
Most dealerships and states require proof of insurance before you can drive the car off the lot. Having insurance in place ensures that you're covered from the moment you take ownership, aligning with legal requirements and protecting your new purchase.
Old vs. New Car Model Comparison
While a new car can mean a newly purchased car, it can also be synonymous with a recent model year car. The more current your car’s year, the more expensive it is to insure because it has a higher ACV.
For instance, the average cost of auto insurance for a 2009 Ford F-150 is $1,140 per year. A similar policy for a 2022 Ford F-150 costs $1,409, which is about 23.60% higher.
Comparing the Cost of Insurance for the 2009 & 2020 Ford F-150
This is 24% more expensive.
New Car Model Cost
Actual cash value (ACV) refers to the amount that the insurance company will pay to repair or replace a vehicle. It is calculated by considering depreciation, which is subtracted from the pre-accident value of the car. For example, let's say a car costs $20,000 brand new and is totaled after you’ve owned it for five years. If the value has depreciated by $5,000 based on wear and tear, the ACV of the vehicle would be $15,000.
Cheapest and Most Expensive New Cars to Insure
The Subaru Forester stands out as a budget-conscious choice, averaging an annual insurance cost of $1,291. On the other hand, the Audi R8 is the priciest to insure, with an annual premium of $3,741. Be sure to familiarize yourself with these differences when planning your next vehicle purchase.
Cheapest New Car Models to Insure
Auto insurance for a new car may vary depending on the model. New car models that are worth less money also tend to be cheaper to insure.
Based on MoneyGeek’s analysis, the cheapest new car models to insure are:
- Subaru Forester: $1,291 per year
- Subaru Outback: $1,309 per year
Cheapest 2022 Car Models to Insure
Most Expensive New Car Models to Insure
Driving a more expensive model can lead to higher insurance premiums. Not only are they more expensive to repair if anything happens, but new car models that tend to be faster than other cars are also more expensive to cover because they’re seen as riskier to insure.
MoneyGeek evaluated average insurance premiums for different new car models and found that the most expensive to insure are:
- Audi R8: $3,741 per year
- Tesla Model S: $3,365 per year
Most Expensive 2022 Car Models to Insure
If your new car has advanced safety features, you may be able to receive money off your premium. Insurance companies may offer discounts for collision warning features, anti-lock brakes, airbags, rearview cameras and anti-theft devices.
Insurance Payouts for New Car Models: What to Expect
Newer car models, especially the most recent ones, are worth much more than older cars. However, there is no guarantee of a high payout in the event of a claim. Various factors could impact the value of your vehicle, including depreciation.
Generally, a brand-new car’s value depreciates by 10% the moment you drive it off the lot. By the end of the first year, it can depreciate 20%.
Depreciation plays a key role in determining how much money you receive in an insurance payout. Given that insurance typically pays out ACV, which deducts depreciation from the pre-accident car value, you may not get a high payout after an accident.
Fast cars are usually more expensive than other car models. That’s why auto insurance costs for sports cars also tend to be high. However, similar to other models, their value also depreciates over time.
MoneyGeek answered frequently asked questions about purchasing coverage for a new vehicle to help you find the best new car insurance.
About Mark Fitzpatrick
- Experian. "What Is Depreciation on a Car and Why Does It Matter?." Accessed March 10, 2022.