The idea of your car getting older and your rate going up seems counter-intuitive, right?
However, car insurance is not just “car” insurance; it covers more than just your car. Like homeowners insurance, auto insurance should be called “auto-owners” insurance.
Calculating Insurance Premiums
Without getting into the nitty-gritty of all the variables and higher maths of calculating premiums, insurance companies are more concerned with you getting into an accident and causing bodily harm or death to you or the other party than the car itself. Simply put, cars can be replaced–human lives cannot.
According to the Colorado Department of Transportation, there were 559 fatalities caused by motor vehicle accidents, and the Nebraska Department of Transportation reported 248 fatalities in 2019.
We know that your insurance policy is probably not high on your preferred reading list, but if you take a look at it, you’ll notice that there are many items covered on your auto policy:
- Bodily injury
- Property damage
- Uninsured motorist
- Under-insured motorist
- Medical payments
- Loss of income
- Funeral expense
- Loss of use
- Rental reimbursement
Notice how these items have nothing to do with your actual car?
As your vehicle ages, the amount the insurance company pays out if a person is injured will not decrease. Continually rising medical expenses of people injured in an accident typically offset any reduction in the value of your vehicle as it ages.
The Small Claims Conundrum
The most common insurance claims are small claims, like fixing a door, bumper, or side pannel due to a minor accident (like accidentally backing your car into your mailbox). These smaller claims cost more for the insurance company to pay out. Plus, older cars aren’t necessarily cheaper to fix than newer ones. The cost to replace a bumper on a 1999 Honda Civic versus a 2020 Honda Civic would be relatively the same.
While we don’t have flying cars yet, automobile technology is rapidly advancing. Older vehicle parts can be more susceptible to failing–like the brakes. The safety features found on new vehicles can actually help to lower the cost of your premium.
In summary, many factors determine your insurance rates, not just the value of your car. Mostly, the liability to others drives the premium cost. Additionally, all of the small and more common claims play just as big of a factor as the big claims that happen less often.
As an independent insurance agent, Adams Insurance Advisors works with many carrier partners to customize your policy to fit your needs and budget. Click below if you want to reach out to one of our agents.