Insurance cost does NOT necessarily go down as your vehicle ages
Many people get frustrated when their car insurance costs continue to increase even as their vehicle ages. The thinking is that as the vehicle gets older, its value is less. Shouldn't the cost to insure it go down?
There are many factors that go into pricing auto insurance. Such as:
- Driving record of operators
- Insurance credit score of the owner
- Where you live
- How much you drive
- Safety rating of the vehicle
- Cost to repair
- Historical loss data
- Vehicle size / weight
- ... and too many more to list
Most accident damage is repaired
While the total value of your vehicle is one factor, most of the factors that affect your rate have nothing to do with the total value of your vehicle. Further, the repair cost is generally more important than the total value of your vehicle because the vast majority of claim settlements for property damage to vehicles are for repairs, not total losses. Vehicles are rarely damaged to the point of being total losses when compared to repairable losses.
With this in mind, think about the cost of vehicle repairs year-over-year. The cost of parts and labor does not generally go down. They increase just like most other things you buy. So, if your vehicle is damaged but not totaled, it will likely cost more to repair a year from now than it does today. Therefore, your insurance will likely face higher costs, which are passed along in the rates they charge.
The people matter more than the car
Many of the factors that affect the rate have to do with the drivers. Where they live. How many miles they drive. Their claims history. Yes, even their credit score. All of these things have much more of an impact on rates than the age (and declining value) of their vehicles.
One huge consideration is whether or not you bundle your home and auto insurance together. Insurance companies give BIG discounts for insuring multiple lines of business for you. If you aren't taking advantage of Multi-Policy Discounts currently, contact us and we will see how much you could save.
Damage to your car is only one part of your coverage
Physical damage to your vehicle is generally paid out under Collision or Comprehensive (sometimes referred to as "Other than Collision). You likely also carry Bodily Injury / Property Damage Liability to protect other drivers for accidents where you are "at fault". You may also have coverage for medical payments, transportation expense reimbursement, towing, and more.
The age of your vehicle would not matter much in determining rates for things like bodily injury to another driver. What would be more relevant are things like the weight of the car, historical loss data, and safety features.
The legal climate in your area can have a large effect on rates as well. If you are in a state that consistently sees large awards for vehicle accidents, that will negatively affect rates.
Our best advice is to control the things that you can. Drive safely and obey posted speed limits. Do your best to avoid accidents. Consider bundling your home and auto insurance to see if it saves you some money. However, you should expect that your insurance premiums will go up slightly every year, just like most other things that you buy.