Young Car Buyers – Insurance Mistakes To Avoid

Lessons in life don't have to be learned the hard way – you can, in fact, learn from other's mistakes. One thing that many have made mistakes with is their auto insurance policies. When young adults go out and buy the first car of their very own, car insurance can easily become overlooked with all of the excitement. Are you considering buying your very first car? Do you know what you should include in your insurance and what it all means? Here, you'll find a few tips to help ensure that you're not upside-down if the time comes to file an insurance claim for damages to your car.

The Deductible

One mistake a lot of young drivers make is to take out a policy with a high deductible. The deductible is what you'll be responsible to pay when you file a claim. For example, if you crash your car and it's totaled, the insurance will pay the value of the car minus what you have the deductible set to – if the deductible is $500, you pay $500 for repairs and insurance covers the rest.

When you're taking out the insurance policy and trying to get the best possible price for your monthly premiums, the agent may suggest that you raise the deductible in order to save on your monthly premiums. That's fine, but know that you'll be responsible for that higher deductible and it could leave you upside-down if the car is totaled. If you're choosing to go with a high-deductible policy, set money aside in an emergency fund to cover the cost of the deductible for if something should happen in the future.

Gap Coverage

A lot of people, even adults, are unaware of how gap insurance can help when you purchase a newer car. If you borrow as much as the car is worth, or more than the car is worth, gap coverage should be purchased. In some cases, this insurance is only available through the financing company, but some auto insurance companies do offer it.

This insurance covers the difference between what you owe on the car and what the car insurance company is actually going to pay for the car. For example, if you bought the car for $20,000 and drive it for a year and it gets totaled, it may only be worth $15,000, but you owe the full amount. The gap coverage would pay the difference to pay off the loan.

Talk with your insurance agent to learn more about protecting your first big investment with a car insurance policy.