New Drivers: Making Smarter Choices for Your Car Insurance

Before getting car insurance it's important to do some research and have a good understanding of the coverage you're signing up for before you get it. Don't be afraid to ask questions and be confident about your purchase.

Meghan Parkinson bought her first car right after she graduated from college. It was a hefty purchase, but one that allowed her more independence to get to work, run errands and anything else that came up. At the time, Meghan (now 24) was feeling the post-grad financial burden in more ways than one. Student loans, rent and groceries were her biggest expenses, not to mention additional costs such as her cell phone plan and TV subscriptions.

“When I bought my car, I was pretty much drained money-wise,” she says, adding that she paid for the car outright, thanks to savings from various part-time jobs. Meghan says, while buying a car might feel like a glamorous purchase, the insurance that comes with it is anything but. Still, she knew it was important to find coverage that worked for her.

What the Experts Say

“I think I put in a lot more time researching car insurance than most people my age,” she said. “I researched insurance companies online and I talked to them on the phone. My main concern was which company was going to have the best deal for the most coverage options.”

Many young drivers are added to their parents’ car insurance policy as a “secondary” or “occasional” driver when they first get their license. Adam Mamdani, Vice President of Field Sales at RBC Insurance, says it’s helpful to begin building a track record as early as possible, and this is a good way to do so.

“If you are insured on your parents’ policy as an occasional driver, you can save money, you’ll gain experience and you’ll build a history,” he says. “But when you’re ready to buy your own car, your insurance will most likely look different because you don’t have the same years of experience that your parents had.”

It’s important to understand some of the factors that go into determining your car insurance premium, and your driving record is one of them. Mamdani says insurance companies will quote a price based on factors such as but not limited to your driving record, type of vehicle and gaps in insurance coverage.

Sometimes your gut instinct is to be removed from your parents’ policy when you’re away at school so that you don’t have to pitch in any extra money. It can save you more money in the long run by staying on and having continuous years of driving experience. You’ll appreciate this when it’s time for you to get your own policy.

Choosing the Right Coverage for You

Meghan opted for an insurance plan with “all-in” coverage, which includes collision and comprehensive coverage. Collision protects her car if it’s damaged in an accident, and comprehensive provides coverage against incidents such as theft, vandalism, weather damage and more. Her policy also includes accident forgiveness, which means her driving record will be protected if she had an at-fault accident.

The terminology alone can make car insurance shopping overwhelming, but Mamdani says a good way to start is by looking at mandatory coverages:

Liability — financial protection if you injure someone or damage property.
Property damage — covers you for damage to your car if you are not at fault in an accident.
Accident Benefits – provides coverage to you if you are injured in an accident or to your spouse, partner or dependent children if you pass away in an accident.

He says popular insurance add-ons include:

Collision coverage, which protects your vehicle if it’s damaged in an accident.
Comprehensive coverage provides coverage for your car in the event of theft, vandalism, fire, falling objects and other incidents.

Other optional add-ons could be coverage of loss, damage or theft of a non-owned vehicle, like a rental, and a waiver of depreciation, which guarantees that no depreciation will be applied to a vehicle that is less than two years old.

Regardless of which plan and add-ons you choose, Mamdani says the best way to save money is to have a clean driving record with no convictions or at-fault accidents, and to pay your bill on time, every time.

Some car insurance rules can vary by province so be sure to get advice from a Licensed Insurance Advisor.

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*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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