Choosing the right car insurance for you is an important decision and may need to be reviewed several times throughout the life of your vehicle. How much you pay for this insurance depends on the age of your car, the type of car and possibly its safety equipment.
If your premium is higher than you hoped, there are ways to reduce your costs, including eliminating unnecessary coverage. Especially as your car ages, it’s important to review your policy to understand which policies are mandatory to purchase and which ones may be overkill.
How does the age of a car affect insurance premiums?
The age of your car is taken into account by your insurer when calculating your insurance premium, as they can determine what types of coverage may be required.
For example, a new vehicle may benefit from optional new vehicle replacement insurance, which is not available for older vehicles. On the other hand, an older car that is less valuable may not need comprehensive accident insurance.
Aside from age, there are several other factors that affect how each individual’s auto insurance is calculated, says Bronwyn Koopman, head of auto product at Farmers Insurance, including:
After your auto insurer determines what coverage your vehicle requires, they determine how much it will cost. Factors considered when calculating your car insurance premium include:
Insurance of a new car vs. a used car
There are no set guidelines for a new car as opposed to a used car. However, your coverage may differ depending on whether you financed the vehicle or bought it outright – such as: B. Adding gap insurance to help pay off your outstanding car loan if your car is totaled or stolen.
New car: Buying a brand new car is a huge financial investment and insuring your vehicle protects you against unexpected expenses should the unexpected happen. That’s why drivers can opt for full auto insurance coverage for their new vehicle, which refers to adding collision damage waiver on top of your state or lender-mandated coverage.
There are several types of auto insurance coverage that you can add on top of that – such as: It’s important to remember that agreeing to additional types of coverage increases the total amount you pay for your auto insurance coverage.
Used cars: If you purchased a used vehicle that exceeds the age and mileage limits for New Vehicle Replacement Insurance, you do not need to purchase optional coverage. In general, both new and used automobiles are required by the states to have minimum coverage, which includes liability coverage for property damage and personal injury, and sometimes personal injury protection.
But as your car gets older, you might be wondering whether it’s worth continuing to pay for collision damage waiver to help pay for damage to your vehicle. A general rule of thumb is that if your vehicle is over a decade old or is worth less than $4,000, you may want to drop this additional coverage.
Paying for full auto insurance for an older vehicle may not be the best use of your money, especially if the actual cash value of the vehicle is less than the cost of insuring the vehicle. If this is you, consider consulting with your local, experienced insurance agent about which insurance coverages are right for you, says Koopman.
How is car insurance calculated?
Car insurance can be calculated based on a variety of factors for your individual vehicle and may vary by insurer.
Typically, most insurance companies determine your auto insurance based on your car’s age, make and model, as well as safety features like a backup camera or a monitor that alerts you when a vehicle is in your blind spot, Koopman says. But other factors to consider are:
Your age: Typically, older drivers are involved in fewer accidents than younger drivers. Because of this increased risk, insurance companies charge more to cover drivers under the age of 25.
Your gender: On average, men tend to pay slightly more for car insurance than women. This is likely because men are more likely to take risks behind the wheel — like driving fast and not wearing a seat belt — which can lead to a higher rate of serious car accidents, according to data from the Insurance Institute for Highway Safety.
However, the gender price gap decreases as drivers age.
Check out this interactive chart on Fortune.com
Your balance: Insurers look to your credit-based insurance score as a way of predicting whether you will make a claim on your vehicle and, if so, how much that claim could cost. To determine this score, your insurer considers information about your credit report, such as outstanding debts, bankruptcies, and your credit history.
Your ticket: If you’ve been involved in multiple accidents or traffic violations, your driving may be flagged as a risk by your insurance agency and may increase the amount you pay for coverage. On the other hand, a clean mileage record is less risky to insure and can save you money on insurance premiums.
How often would you like to drive your car: If you intend to cover a lot of kilometers with your vehicle, there is a higher risk of being involved in an accident or damaging your vehicle. Because of this, car insurance companies may charge you more. If you only want to drive occasionally, your insurer may give you a small discount on your premium.
Where you want to drive your car: Your insurance company takes your vehicle’s location into account to calculate the likelihood of accidents, theft, and vandalism. Typically, people in big cities pay more for insurance than people in rural areas.
What type and amount of car insurance do you have: The cost of your insurance policy may change depending on your coverage limits, your deductible, and the types of auto insurance included in your policy.
Factors that could lower your rate
If your insurance premium is higher than you’d like, there are a few ways you can cut costs.
Request quotes from multiple car insurance companies
Compare the insurance cost of a vehicle before you buy it
Buy safety features like a rear view camera or collision warning technology
Consider an increased deductible
Reduce your coverage on an older vehicle
Take advantage of discounts for safe driving
take that away
When determining what auto insurance coverage is required for a used or new vehicle purchase, “there are many factors to consider, including the value of your vehicle and your ability to pay for the cost of your vehicle in the event of a total loss, whether by accident or if your vehicle is stolen,” says Koopman.
It’s also important to remember that regardless of the age of your vehicle, there is a minimum level of insurance coverage required by your state. Optional coverage for both new and used vehicles can be useful to protect you from potential financial ruin in the event of an accident.
This story was originally published on Fortune.com
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