How to get car insurance in 3 easy steps

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Congrats, new driver: Hitting the road goes a long way when it comes to freedom, autonomy and just plain fun. But when it comes to driving, it’s safety first — and part of driving safely is having sufficient car insurance coverage.

 

The world of auto insurance can be a confusing one, especially for new drivers, who also often face the challenge of higher insurance premiums. Still, there are ways to save money on insurance, both immediately and as your time behind the wheel increases.

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Here’s what new drivers need to know about auto insurance.

 

Recommended: Auto insurance terms, explained

Car Insurance: The Basics

First things first: What is auto insurance, how does it work and why do you need it?

 

Car insurance pays out money for car repairs, medical bills and other expenses in the event you get in an accident. Liability insurance, which pays out money to the other driver when you’re found at fault, is legally required in most states.

 

The amount of insurance you need depends on the law in the state you live in as well as your own risk tolerance level, but since even minor auto accidents can be very costly and most of us can’t afford to pay thousands of dollars out of pocket, auto insurance is a necessity.

 

Unfortunately, auto insurance can be more expensive for new drivers — but again, take heart. There are still ways to ensure you get the best possible rate.

Factors That Affect Car Insurance Price

Car insurance prices are affected by far more than just a driver’s experience level, though that’s certainly an important part of the equation. Here are some other factors that insurers will take into account while drawing up your quote:

  • Driver’s age
  • Driver’s gender
  • Driver’s marital status
  • Driver’s history of accidents and damage
  • Driver’s credit score
  • The primary location the vehicle is kept and driven in
  • The vehicle’s make, model and age

Although there are some general rules that hold true — for instance, that people with lower credit scores or worse driving records end up with higher premiums — the way some of these factors are used is less than transparent.

 

For example, a 2021 study by The Zebra found that women actually pay higher insurance costs than men on average in many parts of America, despite the Insurance Information Institute’s claim that women tend to have fewer accidents than men and therefore pay less for insurance.

 

In short, there’s no easy way to predict what your rates will look like without getting a custom quote, but it’s true that newer drivers tend to face higher insurance premiums. Which does make sense: After all, the insurance company is trying to hedge its bets that you won’t get in an accident (and therefore need an expensive claim paid out), and they don’t have a driving record to rely on while they make their best guesses.

Who’s Considered a New Driver?

Although the classic image of a new driver might be an eager teenager with their brand-new license and mom’s hand-me-down car, there are other people who fit the description, too. Drivers considered “new” include:

  • Teenagers with new driver’s licenses
  • Adults without a driving record
  • People with a gap in their driving history or car insurance coverage

Immigrants to the United States, whose driving records might not transfer over from their country of origin

 

Being a new driver doesn’t change how much insurance you’re required to purchase by state law. As mentioned, though, it can affect your price — so let’s take a closer look into solutions for each category.

Car Insurance for Teens

Teens — or, in many cases, teens’ parents — face some of the highest insurance costs out there because let’s face it: Youthful abandon and lack of experience can lead to accidents. There are some moves you can make to minimize the costs, however, including:

  • Staying on a parent’s policy: For starters, staying on a parent’s policy as long as they’re living under the same roof can keep costs relatively low for teenage drivers … but parents should still expect their policy cost to double.
  • Looking for discounts for good grades or defensive driving classes: Teens may also be able to score good student discounts by maintaining above-average grades in school, or get a discount if they attend and complete an approved defensive driving class.
  • Maintaining a good driving record: For all drivers, maintaining an accident-free driving history goes a long way toward lowering insurance costs over time. Of course, practicing care and vigilance on the road is always of paramount importance … but given how high the cost of teenagers’ insurance policies can be, there’s even more incentive.

Car Insurance for People Who Moved to the U.S.

Even if you have a robust driving history in your home country, if you immigrate to the United States, it’s unlikely to transfer over — which means you could face elevated insurance prices for the first few years you’re a U.S. driver.

 

Furthermore, the first step to attaining U.S. car insurance in most states is to acquire a U.S. driver’s license, which on its own can be difficult without the proper paperwork. However, certain states do offer driving privileges to unauthorized immigrants. You may need to provide documentation, such as a foreign passport or birth certificate, and the resultant license is not valid as federal identification.

 

Once you’re ready to shop for car insurance, we recommend obtaining several quotes to see which company can accommodate you with the coverages you need for the least amount of money.

Car Insurance for Adults Without a Driving Record

Maybe your teenage days are far off in the rearview mirror, but it’s been a long time since you’ve driven — or you’ve never driven at all.

 

Without a solid, recent driving history, car insurance companies will still consider you a new driver, which can push costs up. So can having a gap in car insurance coverage. (There may be exceptions to this rule if your driving gap was due to military deployment status, so be sure to run that information by your prospective insurer.)

 

Again, shopping around for the best quote and maintaining as clean a driving record as possible going forward will help your case considerably. If you’re confident in your driving ability and you’ve built up the savings to afford it if an accident does occur, choosing a higher deductible could also help you save money on monthly premiums.

3 Ways to Save on Car Insurance for New Drivers

Along with the tips we’ve included in the sections above, there are some universal tips that can help most new drivers — and, in fact, most drivers, period — lower their car insurance costs.

1. Choose Your Car Wisely

Certain cars are more expensive to insure than others, including flashy models that are likely to get stolen (or tempt their drivers into three-digit speeds). You can find lists of the cheapest cars to insure online, but generally speaking, slightly older, more modest vehicles are the least expensive to keep insured.

2. Improve Your Credit History

It’s really incredible how many parts of our lives credit history touches — and car insurance is no exception. While your quote is drawn up based on many factors, as mentioned above, your credit history is definitely part of it. Besides, maintaining good credit behavior is highly likely to help you elsewhere, too.

3. Bundle Up

Many insurance companies offer discounts to people who “bundle” coverage or purchase more than one type of insurance from the same company. So if you’re required to have renter’s insurance or have home insurance, see if buying them all from the same provider might save you some dough.

The Takeaway

Although new drivers do face higher car insurance costs, they can still find the very best deal available to them by shopping around. Better yet, these days, that doesn’t have to mean making five different phone calls. Look for auto insurance comparison tools to make it easy to compare car insurance rates at a glance — and to seal the deal and get yourself ready to hit the road!

 

Learn More:

This article
originally appeared on 
SoFi.com and was
syndicated by
MediaFeed.org.

 

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s

website  .

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

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6 strategies for becoming debt free

 

It isn’t the $5 cups of coffee. Or the $50 a month for the gym.

It isn’t that new smartphone, or your shoe addiction, or even that pricey cable subscription. These are common things everyone likes to waggle their finger at when they talk about overspending. But it isn’t necessarily any one of those expenses that really gets people into debt.

It’s usually all of them. And then some.

According to the 2018 U.S. Financial Health Pulse survey by the Center for Financial Services Innovation, 46.5% of Americans said their spending equaled or exceeded their income in the past 12 months. 33.9% said they were unable to pay all their bills on time. And 29.5% said they had more debt than they could manage.

That’s a lot of people who are worried about money.

Though frivolous or impulsive spending can be part of the problem, the slide sometimes starts with the best of intentions — with the desire to get a college education, perhaps, or to own one’s own home.

According to Northwestern Mutual’s 2018 Planning and Progress Study, mortgages and student loans, along with credit cards, are among the leading sources of debt in the U.S.

And when the nonprofit organization Student Debt Crisis surveyed student loan borrowers in 2018, 86% said student debt is a major source of stress. Add in credit card payments, car payments, utility bills, groceries and gas, and all the other things — big and small — that take our money every single day, and it’s clear how debt can become a deep, dark hole.

Which is why it’s so important to have a plan to get back out.

If you’ve wanted to become debt-free for a while, but didn’t know how to get there, think of your plan as a rescue rope you can hold onto during the climb. Everyone’s situation is different, but here are some popular strategies you might consider on your journey to becoming debt-free.

Related: Are you bad with money? How to know & what to do 

 

Doucefleur / istockphoto

 

If you have a significant amount of debt to pay off, you’ll likely be looking to cut costs in a meaningful way. A budget can help with that. First, when you’re going through bills, it can help to determine your priorities, this information can assist you in making informed decisions about what can go and what should stay.

Later, it can create a feedback loop, as you (and your partner, spouse, or other family members) compare real-world spending to the numbers in the budget and consider whether to take corrective action to stay on track.

And over time, it also may be possible to uncover the behaviors that have been holding you back.

If the idea of bird-dogging every penny has been a barrier to budgeting, or if you’ve tried and failed in the past, it may help to keep the process simple. The 50/30/20 rule is a simplified budgeting strategy that’s gained traction because it limits the number of spending categories a budgeter must establish and then follow.

After determining net take-home pay (what’s left after paying taxes), it breaks down the spending money that’s left into three buckets: needs, wants, and savings:

•   50% of the money goes toward needs, including housing costs, utilities, groceries, transportation, medical expenses and any regular debt payments that have to be made (credit card bills, loans, etc.). From there, it’s up to whoever is drawing up the budget to determine what are the true necessities and what belongs in the wants bucket.
•   30% goes to those wants. That’s everything from grabbing takeout, to your Netflix subscription, to getting your car washed and detailed for date night. Logically, this is the portion of the budget that has the most potential for trimming, but emotionally, it might require some real effort to get everything to fit the allocated funds.
•   20% goes to savings. This money might go into an emergency fund, some sort of savings account for short- and long-term goals and/or an investment savings/retirement account. If you decide to pay extra toward your credit card or student loan debt, that expense also would go in this category.

The percentages are meant as a guideline, and they can be tweaked to fit individual needs. The key is to make a budget that’s strict but doable.

 

fizkes/istockphoto

 

Yes, this is easier said than done, but before rolling your eyes and moving on, consider the possibilities.

Is it time for a pay raise? If a bump is overdue, it might be time to have a talk with the boss.

Is there side-gig potential? Do you always have nights or weekends off, and would your employer be OK with your taking on a part-time or occasional job for extra money? Maybe a friend does catering, landscaping, house-painting, or some other work and could use an extra hand from time to time.

Could a hobby become a money-maker? Crafty folks can sell their wares online or at craft fairs and flea markets. History buffs can give lectures or teach classes. Animal lovers can offer dog-walking or cat-sitting services. Where there’s a passion, there’s often a way to earn income.

 

MARHARYTA MARKO

 

If that raise comes through, or you earn a bonus at work, or you get a tax refund from Uncle Sam, instead of living it up while the money lasts, consider using it to pay down some debt.

A few hundred dollars might not feel like it’s making much of a dent, but every dollar you pay over the minimum can help reduce the interest you owe on a credit card or student loan.

To get some idea of how paying even a little extra toward a bill can help, check out the alert on your monthly credit card statement. The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 requires card issuers to warn consumers about how long it will take to pay off a balance if only the minimum is paid each month.

 

Farknot_Architect / istockphoto

 

One way to consolidate debt is with an unsecured personal loan. You may be able to consolidate all or some of your debts at better terms, such as a lower or fixed interest rate and possibly pay them off in less time than you expected.

This strategy could be useful for those who aren’t up for keeping tabs on several bills every month. A personal loan can consolidate multiple debts together into one manageable payment, which could help make it easier to keep tabs on what you’ve paid and what you still owe.

And because the interest rates offered for personal loans can sometimes be lower than the rates on credit cards, you could end up paying less in interest over the life of the loan than you would have if you just kept plugging away at those individual revolving credit card balances.

Typically, the better your financial and credit history, the better the loan terms are likely to be, so it can be a good idea to check your credit record and make sure the information listed on credit reports is accurate.

Then look for a lender who offers the best terms to fit your needs. Keep the length of the loan in mind, as well as the interest rate and other terms to help you on the road of becoming debt-free.

 

DepositPhotos.com

 

It could be difficult (okay, next to impossible) to stop using credit cards completely since they’re commonly used for things like booking or holding flights, making online purchases and more. But making a commitment to reduce credit card utilization could help you cut spending and reduce the amount of money that’s only going toward interest on those cards.

A credit card is a convenient way to pay — if you can keep your balance at zero. But if you can’t afford to erase the balance each month with a full payment, the interest can start piling up.

And though many credit cards make limited-time “no interest” offers, it’s good to review the terms in detail.

For instance, some cards may have terms where if consumers don’t pay off the entire balance by the end of the promotional period, they may be charged all of the interest accrued since the date of purchase.

To better the chances of staying in check, some options may be to consider recording all credit card purchases with a budgeting app or pen and paper and to try and face the costs in real-time, instead of weeks later when the bill arrives.

 

DepositPhotos.com

 

Seeing progress is inspiring for many people. Think about how good you feel when you lose a little weight from dieting or gain some muscle from working out. Even small wins can be motivating.

How does that apply to downsize your debt?

Two of the commonly recommended approaches to debt repayment are the Debt Snowball and Debt Avalanche methods. These strategies vary but primarily focus on paying extra toward just one balance at a time instead of trying to put a little extra money toward all your balances at once.

The Debt Snowball

The Debt Snowball method directs any excess free cash you might have to the debt with the smallest outstanding balance. Here’s how it can work:

•   Start by listing outstanding debts based on what you owe, from the smallest balance to the largest. (Disregard interest rates.)
•   Make the minimum payment on all other debts and pay as much as possible each month toward eliminating the smallest balance on your Debt Snowball list.
•   After you pay off the smallest debt, turn your attention to the next-lowest balance.
•   Keep going until you are debt-free.

The Debt Avalanche

The Debt Avalanche method targets the highest interest rates rather than the balance that’s owed on each bill. It’s more about math than motivation — you can save money as you eliminate each of those high-interest loans and credit cards, which should allow you to pay off all your bills sooner. Here’s how it can work:

•   Disregard minimum payment amounts and balances, and list balances in order starting with the highest interest rate.
•   Make the minimum payment on all other debts and pay as much as you can each month to get rid of the bill with the highest interest rate.
•   Move through the list one debt at a time until you pay off all the balances on your list.

Though the methods are different, both plans provide focus, and as each balance disappears, momentum grows. But a newer approach, the Debt Fireball method, may be a better fit for modern-day debt, which could include a large amount of low-interest student loan debt.

The Debt Fireball

The Fireball method takes a hybrid approach to the traditional Snowball and Avalanche strategies. It’s called the Fireball because it can help blaze through bad debt faster by making it a priority. Here’s how it can work:

•   Categorize all debts as either “good” or “bad.” “Good” debt is generally things that can increase your net worth such as student loans or mortgages. (Interest rates under 7% could be considered good debt—rates above 7% would likely fall into the “bad” category.)
•   List all those “bad” debts from smallest to largest based on each bill’s outstanding balance.
•   Make the minimum monthly payment on all other debts and funnel any extra cash available each month toward the smallest balance on the Fireball’s “bad” debt list.
•   Once that balance is paid in full, move on to the next smallest balance on that list. Keep blazing until all “bad” debt is repaid.
•   Pay off “good” debt on the normal schedule while investing for the future. Apply everything you were paying toward “bad” debt to investing in a financial goal.

The Fireball makes sense mathematically because it gets rid of expensive (or bad) debt first, but it also provides plenty of motivation because momentum can grow as you approach the finish. These two combined elements could provide an extra boost to your efforts.

 

DepositPhotos.com

 

The deeper the hole you’re in, the longer it may take to climb out. But having the right plan in place before you start could give you a better shot at sticking to a budget, minimizing your dependence on credit cards and methodically reducing your debt in a way that keeps you motivated and saves you money.

Learn more:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website 
.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Featured Image Credit: AleksandarNakic.

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