A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 18, 2021

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If you are buying your first car either privately or from a commercial dealership, there are tons of different thoughts and questions crossing your mind. You are excited at the premise of owning a car which will give you the freedom to go where you please, but you are nervous at the thought of taking on the expense. If you are buying your car outright, you still must have enough money to pay for things like taxes, fuel, titling fees and maintenance costs. If you are financing the vehicle, you must find a competitive rate and decide how much of a down payment is necessary to keep your costs down.

No matter how you fund your first-time car purchase, insurance will be an expense that you must be able to cover. You may not actually need an active car insurance policy when you are perusing through the lot and seeing which models stand out, but having coverage the moment that you sign a purchase contract is a must. If you have a fixed budget and you are extremely cost-conscious, it is important that you learn how to select a vehicle that you can afford to continuously insure. Start comparing car insurance rates now by using our FREE tool below! Insurance costs may go down over time but they will not go away. Read this consumer guide to insuring a newly purchased vehicle, and learn everything that you need to know.

Car Insurance Requirements and Laws

Every state has some type of compulsory auto insurance law and coverage requirements that is in force to protect citizens in that state. If you plan on becoming a vehicle owner some time in the near future, you should not only learn about the requirements but also how insurance works and how coverage works to protect you. The laws and auto insurance systems vary by state, so taking the time to learn about the requirements that apply when you plan on living and registering the car is crucial.

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Liability Requirements in Your State

A majority of states that operate under a tort auto insurance system require vehicle owners to have personal liability insurance that will pay for third-party claims that are brought against you.

The reason why states have compulsory laws requiring vehicle owners to carry liability insurance is because the owners are obligated to pay for the damages that they are responsible for and therefore need to be able to show that they are financially responsible.

The state may not be concerned with the owner’s ability to pay for their own repairs or medical bills, but they are concerned with the negligent’s ability to pay for claims for third-party repair bills or medical treatment. Here is a breakdown of the common coverage requirements in states that have fault-based insurance systems and structures:

  • Bodily Injury (BI):

Bodily Injury insurance on a car insurance policy will cover both short-term and long-term injury related costs that are incurred by a third-party when you are deemed to be at fault for a collision. The coverage pays for medical expenses, medical transport, funeral costs, pain and suffering, loss of income, and also for the cost of defense (which is not deducted from your limits).

  • Property Damage (PD):

Property Damage is the second type of liability insurance that will pay for damage that is caused to another driver’s car or to other real property that you do not own. The coverage is required because it is the owner’s duty to help victims who suffer damage because their actions recover. While some are able to pay for these expenses out of pocket, the insurance requirement ensures that the costs can be covered at the time of the loss.

  • Other Requirements:

Liability is not always the only requirement that you will need to be familiar with. In some states, you will also need to carry Uninsured Motorist or Medical Payments coverage. While these are required, there could be an option to reject the coverage offer if you sign a document. Make sure that you understand that you are signing away protection that will cover your own medical bills before you save money by cutting corners.

When must you have coverage in place?

If you are shopping for a car, you should also be shopping for coverage at the same time. As a prospective buyer you do not have to legally have coverage in place. You do, however, need insurance when you officially make a purchase and become a vehicle owner. While you do not technically need to bind coverage until you step foot out of the finance office or until you drive off the lot, you should know how much coverage will cost you. By researching the price of insurance for a specific vehicle, you can find the safest model that you can afford to cover.

Shopping for a Safe Car

You should always set a budget before you even fall in love with a car. With a strict budget, you are much more likely to lean towards the more practical car instead of the most luxurious one. You should always look are car safety rankings before anything else. After you find safe car options, you can then move on to finding those that do not cost a fortune to insure.

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Comparing the Cost of Insurance from Model to Model

Do not wait until you have negotiated a fair price or a good interest rate to find out how much insurance is going to set you back. Instead, you should use the resources that are available to you to price the cost of coverage early on in the process. You may not have the official details of a vehicle, but by selecting a make, model and sub-model, you can get a general idea of how much the premiums will be. List some of the cars that you want and begin to price insurance. Knowing these costs will give you an advantage as a budget-conscious consumer who wants their first car to be the best car for them.

Comparing the costs of insurance can be a time-consuming chore when you are not sure of the vehicle type you are going to purchase or the carrier you want to go with. If you reach out to specific insurers, you might spend an entire weekend shopping around. If you use an online rating tool, however, you can see instant quotes for multiple vehicles from multiple carriers. Start comparing car insurance rates now by entering your zip code in our FREE tool below! Use this intuitive tool to your advantage and you can have your insurance ready for the moment that you take possession of your new car.