Does my vehicle’s age or value have an impact on the price of my car insurance?
Because many people view auto insurance as protection for their cars, this question is often asked in the insurance industry. It’s not hard to understand why most advertisements and commercials emphasize the damage that vehicles can do to them. I’m thinking right now of the one in which a guy smashes his car with a hammer. There is more to auto insurance that meets the eye. Let’s take a look at why your car’s value doesn’t matter as much as you think.
Liability coverages, for example, are one of the most important reasons you should purchase car insurance. This coverage is there to protect you and your assets in the event of an auto accident. If you are at fault for causing a minor accident, your liability coverages will cover the property damage to the vehicle of the other party. Depending on the extent of damage, this could cost you anywhere from $1000 to $5000. This is a small loss for insurance companies, but it could mean that the victim sustained whiplash injuries that required hospital bills and follow-up care. What started as a simple fender bender has now become a $90,000. What happens if someone is killed in an accident? The benefits for survivors can be so high that they may even qualify for $1 million.
Although it is rare for such an incident to occur, insurance companies know the risks they take by insuring drivers, particularly those with high limits. It doesn’t matter whether you drive a new Lexus or an older Honda in these cases.
Other coverages such as Medical Pay and Underinsured Motorists are not affected by the car’s value. It doesn’t matter if someone is injured in a Cadillac 2012 or 2008, the loss will be the same.
OK, my rate does not depend on the vehicle’s value. How can I lower it?
This is a great question. If you don’t want to shop, you might consider raising your deductible. You can increase your deductible from $250 to $500 and put more money in your pocket. You can increase your deductible to $500 by paying $1000 if you have $500. However, any claim will still need to be paid. If your vehicle is financed, you may need to keep the deductible under $500.
You could consider insuring your vehicle yourself if you don’t own it. Calculate how much insurance you would need to insure your vehicle based on its current market value. If you insure your car for $600 per year with no physical damage and $450 liability, it will cost $300 each year. Ask yourself this question before you make that decision: “Can I afford to replace my car if it is stolen or damaged in an accident?” If you don’t have the money to replace your car, then you won’t need physical damage coverage.
It’s a good idea to get a quote for comparison. It is an insurance estimate that compares different companies and their rates to determine which one offers the most value. Company A may offer $700 for six-months, while Company B might offer a rate of $400 over six months. You might find Company A offers a better deal if you change cars. This is why it is a good idea to get “what if” quotes from independent agents while shopping for a new vehicle.
