Budgeting for a Car? Don’t Forget about Insurance!

You’ve got it—your driver’s license that is! And your parents have agreed to help buy you a used car—but there is a dollar limit.

When you’re budgeting, don’t forget about insurance. (Your parents aren’t likely to.) If you mention insurance first, though, that might help your parents realize how responsible you are.

Yes, some people do drive without insurance—but they shouldn’t. After all, almost every state requires you to have auto liability insurance.

Also, according to the Insurance Information Institute, all states also have financial responsibility laws. This means that even in a state that doesn’t require liability insurance you need to have sufficient assets to pay claims if you cause an accident. If you don’t have enough assets, you must purchase at least the state minimum amount of insurance.

Finally, if you've financed your car, your lender may require comprehensive and collision insurance as part of the loan agreement. If your parents and you plan to finance the purchase of your car, check with your credit union to see what’s required. Get the facts before you even look at cars.

Insurance is one of those things that you hope you never need, but it exists to protect your assets (or, in this case, your parents’ assets).