Paying out of pocket for the replacement of a new car can be expensive — that’s why it’s important to get adequate insurance coverage to pay for damages after an accident.
Insurers consider various factors when calculating new car insurance costs, but make and model are among the most significant. Higher value vehicles have higher actual cash values (ACV). Insurers take on more risk when covering these vehicles because they will have to pay more in the event of total damage.
Generally, newer cars are about 20% more expensive to insure because they’re worth more than older vehicles.
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Car insurance for a new vehicle is typically more expensive due to the car’s high value. However, some new cars are more costly to insure than others.
On average, the 2020 Subaru Forester is the cheapest new car model to insure at $1,150 per year. The 2020 Nissan GT-R is the most expensive to insure at an average cost of $3,096 per year.
Getting full coverage — which includes comprehensive and collision insurance — may be best for new cars. If you purchased your vehicle through a loan, consider gap insurance.
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How to Get Insurance for Your New Car
Car insurance can protect you from possible financial burden after a covered incident. But not all auto insurance policies are the same. The best insurance company and insurance type will depend on your personal needs and circumstances. For instance, you may need more coverage and pay higher premiums if you have a newer car.
Knowing what steps to take when getting insurance on a new car can help you find the best policy for your needs.
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 age, employment details and address, your driving and insurance history. It also includes information about your car, including its make and model, registration and vehicle identification number (VIN).
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.
Determine how much coverage you need.
Considering your individual insurance needs is crucial 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.
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 discounts and reward opportunities. It would also help 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.
If you already have an insurance policy, it will cover your new car the moment you drive it off the lot. Typically, the level of coverage is the same as your old car. That said, it’s essential to reach out to your provider to make sure that you are covered; driving without insurance can lead to arrest or significant fines.
Which Type of Insurance Coverage Should You Get for Your New Car?
The type of coverage is one of the most critical factors you need to consider. Not only will it affect the cost of your policy, but it will also determine what your insurance covers.
In most cases, liability coverage that includes bodily injury and property damage is enough to meet state minimum requirements. But, it is usually doesn’t include enough coverage to repair or replace a new vehicle in the event of an accident.
Types of Coverage Available
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 amount. In the event of total damage, 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
Getting car insurance for a new car can be challenging, especially for first-time buyers. Certain blunders, such as not getting enough coverage or insuring within the grace period, could cause problems. MoneyGeek listed some of the most common missteps to avoid when insuring a new car.
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 crucial to find the right balance between affordability and coverage.
Buying unnecessary add-ons.
It’s also possible to buy more coverage than you need, 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. It is crucial to refrain from letting your insurance expire before you renew it. Make sure you 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. But, if you want to avoid a sizeable 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 already have an active car insurance policy, you can add your new car to it. However, be sure to add your vehicle to your policy before your insurance grace period ends.
Your grace period is the length of time you’re allowed to drive a new car before adding it to your insurance policy. The grace period varies depending on the insurer but is usually within seven to 30 days of purchasing a new vehicle.
How Much Will It Cost to Insure Your New Car?
New car insurance costs can be expensive because of the high value of new vehicles. For example, the average cost of full coverage car insurance is $1,424 per year. But, the average annual rate increases to $2,520 for expensive car models.
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 per 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. If you complete a defensive driving course, you may also get a discount.
- 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.
To estimate the cost of your insurance premium for a new car, get quotes from multiple companies in advance. Comparing rates from several providers is the best way to find your most affordable options.
How Much Is Insurance for Cars of Recent Model Years?
While a new car can mean a newly bought 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 2005 Ford F-150 is $999 per year. A similar policy for a 2020 Ford F-150 costs $1,269, about 27% more to insure than an older model.
Comparing the Cost of Insurance for the 2005 & 2020 Ford F-150
This is 27% more expensive.
The cost of new car insurance also varies depending on the car’s make and model. For instance, the cheapest car to insure is the 2020 Subaru Forester ($1,150), and the most expensive is the 2020 Nissan GT-R ($3,096).
Average Costs of Insurance for Cars of Recent Model Years
BMW 1 Series
BMW 3 Series
BMW 4 Series
BMW 5 Series
BMW 7 Series
Chevrolet Camaro SS
Chevrolet Camaro ZL1
Dodge Challenger R/T
Dodge Challenger SRT Hellcat
Ford Mustang EcoBoost
Ford Mustang Mach-E
Jeep Grand Cherokee
Kia Soul EV
Mercedes-Benz AMG C 63
Mercedes-Benz CLA 250
Mercedes-Benz GLA 250
Tesla Model 3
Tesla Model S
Tesla Model X
Tesla Model Y
Volvo XC40 Recharge
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 depreciation value based on wear and tear is $5,000, the ACV of the vehicle would be $15,000.
Which New Car Models Are the Cheapest 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: $1,150 per year
- Honda CR-V: $1,172 per year
Top 20 Cheapest 2020 Car Models to Insure
Average Annual Premium
Which New Car Models Are the Most Expensive to Insure?
Driving a more expensive model can lead to higher insurance premiums. 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:
- Nissan GT-R: $3,096 per year
- Audi R8: $2,963 per year
Top 20 Most Expensive 2020 Car Models to Insure
Average Annual Premium
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 — one of these is 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 the depreciation value 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.
Frequently Asked Questions
MoneyGeek answered frequently asked questions about purchasing coverage for a new vehicle to help you find the best new car insurance.
To obtain the average costs per model year of the cars featured in this article, MoneyGeek sourced quotes for each model from Quadrant.
About Mark Fitzpatrick
- Experian. "What Is Depreciation on a Car and Why Does It Matter?." Accessed March 10, 2022.