That’s a question we get asked by a lot of our customers. On the surface, it seems that as your vehicle gets older and is worth less, your auto insurance premium should also drop. After all, if your vehicle gets totaled, your insurance company will have to pay out less. While that does factor into the equation, there are several more things that come into play.
First off, as a vehicle gets older, the amount your insurance would pay out if someone gets hurt will not decrease. In fact, medical care tends to increase every year and sometimes substantially. Then factor in that most cars as they get older, tend to not be as safe unless they’re very well maintained. Stopping distance increases, brakes can fail, turning ability can be reduced, etc on a vehicle as it ages. These all increase your chances of having a claim, which would cause rates to go up, not down.
So the small reduction from year to year in the value of your vehicle is typically offset by the higher chances of a claim happening. An even bigger factor is the liability and medical payment payouts. The average payout for medical care continues to go up every year. So, if someone is injured in an accident involving your vehicle, chances are the amount your insurance company would have to pay out for any injury increases.
Then there is the “small claim” part of the equation. Most insurance claims are small claims. This is when a bumper, a door, or a side panel are damaged in a minor accident. If you back into your mailbox and damage your rear bumper, that claim amount goes up every year, too. Your vehicle may be worth a lot less than it did when it was brand new, but the insurance company is having to pay more every year to pay those small claims.
So even though a total loss payout would be much less than when your car was brand new, all those small claims (that are a lot more likely to happen) cost your insurance company more every year. This causes your rate to stay the same or slightly go up.
One last factor that comes into play are safety features. New technology is developed all the time to keep you safe. Not all cars will have every feature, but obviously your older car won’t be getting any upgrades unless you foot the bill as manufacturers don’t have a practice of calling you to bring in your vehicle for upgrades. And those safety features keep claims costs down, helping to keep your rates down too. This can actually cause some new cars to be less to insure than older cars.
So, yes, it’s possible that even though your car is another year older, your rates might go up. All the small and more common claims play just as big of a factor as the big claims that happen less often. And the biggest factor is the liability to others. Even though the cost of an older car may be a little less than a newer model, we sometimes can get a lower rate for customers when they get a new car due to all these other factors.
We’re always ready to make sure you’ve got the best policy for all your needs – keep in mind, it’s not always about the lowest rate, either! If you want a review of your current policy, we’re always just a phone call or text away – p: 314-894-1313 or text: 314-894-1313