Purchasing car insurance is mandatory in the US. It is a criminal offense to drive or own a vehicle without having insurance coverage. As your car gets older, it will decrease in value. This can lead you to wonder if your car insurance costs will also decrease with the age of your vehicle. There are different reasons why your premium won’t decrease as your car gets older. At Action Insurance we believe in helping you understand the insurance industry so that you can make informed choices. Here are some reasons why your car insurance will likely not decrease even though your car’s value decreases over time.
Why Your Car Insurance Does Not Decrease
Although your car’s value drops as you use it over time, the insurance premium does not go down. Your insurance premium is calculated based on the risk the insurer will be inheriting from you. By understanding some of the factors that go into determining your premium rates, you can better understand why the decreased value of your vehicle does not lead to lower insurance premiums.
Theft rate
Studies have shown that older cars get stolen more than newer cars. This may seem ironic as you would expect newer, more flashy vehicles to be stolen over older models. This fact puts older vehicles in a riskier insurance profile than newer models. This makes the premium on your vehicle stay the same or increase based on other factors.
Driving record
Insurance companies know that the way you drive has a much large effect on accidents than the age of your vehicle. When getting car insurance for your vehicle, your driving skill is an important aspect that is evaluated and used to set your premium. If the insurer considers you a reckless driver, your premium will be higher than someone the insurer considers a safe driver. The age of your car is not taken into account when calculating this risk.
Collision claims
When vehicles are involved in an accident, insurers pay out collision claims to repair the damage to the vehicle. Most motor accidents do not result in wrecked cars and involve minor repairs. The severity of damage resulting from car crashes is not a function of your vehicle’s age. As a result, having an older vehicle does not guarantee you a reduced premium.
Policy Type
There are different car insurance policies or a combination of policies that you can take out on your vehicle. The most common policy drivers purchase is a third-party liability and accident benefits package. These benefits are the bulk of your car insurance costs. The value of your premium results from the amount of coverage you have and not the age or model of your vehicle. Most states have a minimum amount of coverage set that you must carry that has nothing to do with what vehicle you own.
These four reasons are why your car insurance may not decrease as your car ages. There are often other ways you can reduce your insurance premium to pay less. Contact your insurance representative to find out how.
Car insurance is important if you want to remain safe while driving. If you cannot afford to pay large premiums for your car, you can sometimes reduce your premium costs. Work with an agency that can secure you the right auto insurance policy. Contact Action Insurance Group who can help you find reliable coverage for the right price.
Comments are closed.
