How to choose car insurance for beginners? Explaining how to choose and how to get it cheaper

There are two types of car insurance: compulsory insurance and voluntary insurance. Of these, voluntary insurance is not required by law, but it is better to enroll in it just in case.

There are many insurance companies that handle voluntary insurance, so it is important to choose one that suits you. This article provides an easy-to-understand explanation of recommended choices and ways to reduce premiums for those who are signing up for car insurance for the first time.

Types of car insurance

There are two main types of automobile insurance: compulsory insurance and voluntary insurance.

The official name of compulsory insurance is automobile liability insurance, and it is also called compulsory automobile liability insurance. Compulsory automobile liability insurance is compulsory insurance that is required by the Automobile Liability Security Law to provide relief to victims of automobile accidents. Therefore, if you own a car, including a moped, you must enroll in this insurance.

On the other hand, there is no obligation to purchase voluntary insurance, and individuals can decide whether or not to purchase it at their own discretion.

Compulsory insurance and voluntary insurance have different coverage limits and payment limits. Since there are some damages that cannot be covered by compulsory insurance alone, you should also consider taking out voluntary insurance in case of an emergency.

Types of Insurance	Compulsory automobile liability insurance	Voluntary insurance
Coverage	Interpersonal only	Interpersonal Objective If the contractor is killed or injured Damage to automobiles, etc.
Payment Limit	Injury: 1.2 million yen Permanent injury: 750,000 yen to 40 million yen Death: 30 million yen	Varies by insurance company and contract plan

If you cause injury to the other party in a car accident, both types of insurance will compensate you according to the extent of your injury. In addition to medical expenses, medical expenses and compensation will also be covered. The limit of compensation for residual injuries varies depending on the grade.

There are two grades, broadly divided into grade 1 and grade 2. Grade 1 is further divided into grades 1 to 14, and the amount paid is based on the grade. In the event of death, compensation for damages to surviving family members, burial expenses, and lost earnings are also covered.

The biggest difference between compulsory insurance and voluntary insurance is the scope of coverage. Compulsory insurance only covers bodily injury, while voluntary insurance covers property damage and the death or injury of the policyholder. The payment limit for voluntary insurance also varies depending on the insurance company and the premium.

Many insurance companies also allow you to contract with an unlimited payment limit. When comparing the two, you can see that voluntary insurance offers more generous coverage than compulsory insurance.

The risks of not taking out optional car insurance

Unlike compulsory automobile liability insurance, voluntary insurance is not required by law. Therefore, car owners have the option of not purchasing it. However, if you do not purchase voluntary insurance, you may find yourself in a difficult position in the event of an accident.

Unable to handle large amounts of bodily injury compensation

The scope of coverage for compulsory automobile liability insurance, which is mandatory for all drivers, is limited to third-party damages. Even if you cause serious injury to the other party, the maximum amount that will be paid is 1.2 million yen. However, depending on the nature of the accident, the amount of compensation may exceed 100 million yen.

If you do not have voluntary insurance, you will have to pay for all damages that are not covered by compulsory insurance. If the amount of compensation is large, it will affect your future life, so it is important to take out voluntary insurance and prepare for the worst case scenario.

The full amount of compensation for property damage will be borne by the insured

Depending on the nature of the accident, damage may occur not only to people but also to other people's homes, stores, and other "property" damage. Since compulsory automobile liability insurance is insurance to provide relief to victims of automobile accidents, it does not include property damage in its coverage.

Therefore, if you cause a property damage accident, you will have to pay the compensation at your own expense. Since the scope of coverage for voluntary insurance includes property damage, a certain amount will be covered in the unlikely event of a property damage accident. Even small damage to "things" can be expensive, so it is a good idea to subscribe to voluntary insurance.

All vehicle repair costs will be borne by you

The scope of coverage for compulsory automobile liability insurance is limited to third-party liability and does not include vehicle liability. If you do not have voluntary insurance, you will be responsible for all damages incurred to your vehicle or the other party's vehicle.

The reality is that vehicle repair costs can be expensive, even for minor scratches. For luxury cars, it is not uncommon for repair costs to reach hundreds of thousands of yen even for minor scratches. In addition to not having vehicle coverage, compulsory automobile liability insurance cannot handle expensive claims.

Average car insurance rates for 18-year-olds

The age requirement for obtaining a regular driver's license is 18 years old. Therefore, many beginners tend to consider taking out optional insurance. If you take out optional insurance at age 18, the average premium is around 200,000 to 400,000 yen per year.

Insurance premiums vary depending on the type of vehicle you insure and the contents of your contract plan. Be sure to check the details of your contract plan carefully and subscribe to the optional insurance that is right for you.

Relationship between insurance premiums and grades

The premiums for voluntary insurance vary depending on the grade. Grades are a system in which the policyholder is ranked according to his or her accident history, and the premium discount rate varies. There are 1 to 20 or 22 grades.

When you first sign up for voluntary insurance, you will be assigned grade 6. After that, if you let the insurance mature without using it, your grade will gradually increase. If you do not use insurance, you are considered to have a low risk of accidents, so the higher your grade, the higher the discount rate. On the other hand, if you have an accident, your grade for the following year will be reduced by 3 grades.

Relationship between insurance premiums and age

Insurance premiums tend to vary not only with grade but also with age. This is because the higher the grade, the cheaper the insurance premiums become. In other words, the higher the age at which you are at risk of accidents, the higher the insurance premiums will be.

According to the National Police Agency's "Traffic Accident Occurrence Status in 2021," there are many accidents caused by teenagers who have just obtained their driver's license and people over 65 years old.

age	Number of traffic accidents per 100,000 licensed drivers of mopeds or larger
16-19 years old	1043.6 results
20-24 years old	605.7 results
25-29 years old	424.9 results
30-34 years old	329.1 results
35-39 years old	299.4 results
40-44 years old	292.8 results
45-49 years old	299.5 results
50-54 years	299.0 results
55-59 years old	304.4 results
60-64 years	302.6 results
65-69 years	302.5 results
70-74 years old	336.0 results
75-79 years old	390.7 results
80-84 years	429.8 results
Age 85 or older	524.4 results

*Source: National Police Agency "Traffic accident occurrence status in 2021"

In particular, the 16-19 age group has the highest number of accidents of all age groups. Therefore, insurance companies set higher premiums for this age group.

Things to check when buying car insurance for beginners

When purchasing optional insurance, be sure to check the scope of insurance coverage and the maximum amount of insurance payouts.

Insurance Coverage

There are four main types of voluntary insurance coverage:

• Interpersonal
• Objective
• car
• Special Terms

If an accident occurs, not only the driver but also passengers may be injured. If you often drive with passengers, make sure that your passengers are included in the scope of coverage.

Also, accidents are not the only cause of damage to a car. Depending on the insurance company, you may be able to receive compensation if your car is damaged due to the following reasons:

• fire
• explosion
• typhoon
• Storm surge
• flood
• earthquake
• theft
• Pranks etc.

To prepare for the worst case scenario, it is a good idea to take out voluntary insurance that will provide compensation for reasons other than accidents.

Minimum required coverage

If you are unsure about the scope of your insurance, at a minimum, you should get the following coverage:

• Personal liability insurance
• Property damage liability insurance
• Personal Accident Insurance
• Passenger Accident Insurance
• Vehicle Insurance

If you set your personal liability insurance and property damage liability insurance to unlimited, you will be covered even if the amount of compensation for damages becomes high. Personal injury insurance and passenger injury insurance provide compensation for injury or death of the driver and passengers who cause an accident.

Personal injury insurance covers actual expenses such as medical expenses and hospital visits up to a certain limit. Passenger liability insurance is paid on a per-day basis or per-symptom basis once the extent of the injury is confirmed. If you rarely drive with passengers, such as when commuting to school or work, it is also an option to only purchase personal injury insurance.

In addition, since even small scratches on a car can be expensive to repair, having vehicle insurance can help reduce your out-of-pocket expenses.

Compensation that gives you peace of mind

In case of an emergency, it is reassuring to have the following coverage in your optional insurance:

• Attorney Special Agreement
• Road service special clause etc.

The attorney special clause is a special clause that compensates for the costs of consulting and requesting an attorney when an accident occurs. In the case of a hit-and-run accident, the Attorney Act stipulates that insurance companies cannot negotiate a settlement with the other party, so you must negotiate it yourself. However, if you have an attorney special clause, you can request an attorney even if you are involved in a hit-and-run accident.

Road service special clauses are special clauses that cover the costs of using road service when your car becomes immobile due to an accident, running out of gas, etc. Depending on the insurance company, in addition to towing costs, they may also cover accommodation costs and car repair costs.

Insurance benefits limits

The maximum amount of insurance payouts varies depending on the insurance company and the contract plan. If you have an accident, the amount of compensation for damages to the other party, passengers, and the car may be high. Therefore, if you set your personal injury liability insurance and property damage liability insurance to unlimited, you can rest assured that you will be covered even if the amount of compensation for damages becomes high.

However, unlimited does not mean that the insurance will be paid out in any amount that exceeds the amount of damages. The insurance will be paid out only up to the amount of damages that the tortfeasor should bear.

Insurance company support

The support offered by each insurance company varies, so it is important to compare different companies and choose the one that best suits you.

Here are some things to compare when choosing an insurance company:

• support system
• Responding to the accident scene
• Road service details etc.

Since you never know when an accident will occur, it is a good idea to choose an insurance company that provides support 24 hours a day, 365 days a year. If an accident occurs, you will be busy with various responses, such as contacting the police and requesting an ambulance.

If the insurance company has an emergency response service, the staff will arrive quickly and take appropriate action. Also, please note that the number of road service locations varies depending on the insurance company.

Insurance companies with many branches will be able to respond more quickly. Note that the contents of road service vary depending on the insurance company, so be sure to check whether accommodation and return home expenses are included.

Insurance premium price

The premiums for optional insurance tend to be higher the wider the scope of coverage and the more special clauses you add. Premiums vary by insurance company, even for the same scope of coverage and support. For this reason, it is important to compare companies to find the cheapest option for the scope of coverage and support you want.

When comparing insurance premiums, request quotes from multiple companies. If you just want a quote, you can request one for free. Since insurance premiums tend to be higher for beginners in particular, be sure to choose one that balances the scope of coverage and support.

Insurance company reviews and reputation

When choosing an insurance company, one way to do so is to refer to the word-of-mouth and reputation of policyholders. Even if the official website lists many benefits, the reality may be different. The reality is that you often cannot know the reputation of an insurance company until you actually sign a contract or make a claim.

You can check customer reviews on online review sites. Some people also post reviews on social media, so be sure to check out a variety of reviews.

A must-read for beginners! How to reduce your car insurance premiums

The current situation is that beginners are subject to six grades of insurance, which means that the annual premiums tend to be high, at around 200,000 to 400,000 yen. However, with some ingenuity, it is possible to keep premiums down. From here on, we will introduce ways to reduce premiums, so please use them as a reference.

Inherit family rank

If you want to keep your insurance premiums down, check to see if you can inherit your family's grade. The grade that determines your insurance premiums can be inherited from your family. If you can inherit it from your family, you can start at grade 20 even if you are joining for the first time.

Specifically, this is a method of transferring a car purchased by a parent with a 20th-grade insurance rating to a child's name. Since the parent will no longer be insured, they will need to take out new insurance, and the premiums will be higher than before. However, the total premium for the parent and child will be cheaper than if the child were to take out new insurance.

Choose carefully the coverage you add

In addition to personal liability insurance and property damage liability insurance, optional insurance can be added to special clauses. The contents of the special clauses vary depending on the insurance company, but adding them can make the total insurance premium higher, so be careful.

When signing a contract, the agent may suggest adding special clauses. If you are persuaded to add them, your insurance premiums will increase, so be sure to carefully select only what you really need.

Get quotes from multiple insurance companies at once

One way to reduce your insurance costs is to get quotes from multiple insurance companies.

Contacting each insurance company and getting quotes yourself can be time-consuming and troublesome, so we recommend using a bulk quote service. You can compare products from multiple insurance companies by simply entering your information once.

Estimates are free and you can compare not only insurance premiums but also coverage, so be sure to take advantage of them.

3 ways to get car insurance for the first time

There are three main ways to apply for voluntary insurance. In recent years, it is also possible to apply over the phone or online without meeting a representative.

1. Join through the dealer where you purchased your car

Many dealers act as agents for insurance companies. If you sign up for optional insurance through a dealer, you can conveniently contact the insurance company and have your car repaired in one place in the event of an accident.

Some manufacturers offer their own insurance, but dealers only have a limited number of insurance companies to choose from, so it's not uncommon for them to not offer the insurance company you want.

In addition, due to agency commission, premiums are set higher than if you were to purchase insurance directly from the insurance company.

2. Use an auto insurance agency

You can also apply for optional insurance through an agency. The agency has auto insurance experts on staff, so you can consult with them in detail about any points you are unsure about. They will propose a plan that suits your needs, so it is recommended for those who are unsure about which plan to choose.

Some agencies will handle post-accident correspondence on your behalf. However, because agency fees are charged, premiums tend to be higher than if you were to insure directly with an insurance company.

3. Join by phone or internet

You can also apply for optional insurance by contacting the insurance company directly via telephone or the Internet. In recent years, the number of so-called direct-type insurance companies, where contracts and insurance claim procedures can be completed online, has been increasing.

If you apply online, you can apply 24 hours a day. In addition, since you do not need to go through an agency, there is no agency fee. If you have any questions, you can contact us by phone or chat.

However, the direct type does not include a service where an insurance company representative rushes to the scene of an accident. Some insurance companies offer a rush service, but it is a security company, not the insurance company, that actually rushes to the scene.

[For beginners] Frequently asked questions about car insurance

Finally, we will introduce some frequently asked questions about voluntary insurance. These are carefully selected questions aimed at beginners, so please refer to them if you are planning to apply for voluntary insurance for the first time.

When should you get car insurance?

You should enroll in voluntary insurance so that coverage will be applied from the day you start driving a car. In the case of direct insurance, coverage may be applied as soon as the first day, but this is only a guideline.

Depending on the time of application, it may not be applied on the same day. If there are any defects in the documents, you will need to resubmit them, so be sure to apply early. In addition, you can apply even before delivery of the car if you know the model, car name, first registration date, and registration number.

What is 1-day car insurance?

There is also a plan called "1-day car insurance" for optional insurance. 1-day car insurance is optional insurance that you can subscribe to on a daily basis. Basically, it is a plan that can be used when renting a car.

Plans generally include bodily injury liability insurance, property damage liability insurance, and road service. Some plans with lower premiums do not include vehicle insurance, so be sure to choose a different plan if you need it.

What happens to my rating if I change insurance companies?

Even if you change insurance companies, it is possible to carry over your grade. However, some mutual aid insurance cannot be carried over, so be sure to check in advance. If you want to carry over your grade, you will need a document called a suspension certificate.

A suspension certificate is a document required to maintain your grade when you re-enroll in voluntary insurance after the contract is no longer necessary. Normally, if the insurance coverage date is more than 8 days after the previous expiration date, your grade will be reset. However, if you have a suspension certificate, your previous grade will be maintained for 10 years.

Check and find the car insurance that's right for you

When driving a car, you are required to enroll in compulsory automobile liability insurance. Voluntary insurance is not mandatory, but the current situation is that if you have an accident and the amount of damages you have to pay is high, there is a high possibility that compulsory automobile liability insurance alone will not be enough to cover the costs.

Since the number of accidents among 16-19 year olds is high, the premiums for voluntary insurance tend to be high. However, if you join, you can rest assured in the event of an emergency. Since the coverage and premiums vary depending on the insurance company, compare multiple companies and choose the one that suits you.