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Car Insurance

5 factors that affect the price of your car insurance

Auto insurance carriers typically look at an individual’s address, age, driving history, and home ownership status when setting premium costs. But what else could be affecting your rates?

Spring is approaching and the thought of vacations, road trips, and sunday drives is beginning to occupy the minds of many as they sit in the office or classroom. If you’re catching the first wave of spring fever, you may also be thinking about buying a luxury car so that you can ride the season in style. Whether you’re having a midlife crisis, accepting a promotion, or just looking for a way to treat yourself, a luxury vehicle shouldn’t be an impulse purchase. Payments on a high end car don’t end with the price tag on the windshield. The value of your car can directly affect your expenses down the road, including repairs and insurance premiums.

Car insurance providers take many factors into consideration in order to calculate the costs of their customers’ premiums. While it isn’t an exact science, companies will typically look at a few things like an individual’s address, age, driving history, and home ownership status. Besides these factors, the value of your vehicle is a large part of the calculation because it increases the coverage needed to replace the car in the event of an accident or theft. The value of your vehicle and subsequent insurance will be determined by make, model, and year. But, your new ride may also make you vulnerable to indirect factors such as theft and a lower credit score, so we’ve also included those below.

Factors that impact the price of your auto insurance premium:

  1. Make:
    Do you drive a luxury, foreign car or standard American station wagon? Foreign or luxury cars often have higher policy premiums due to the rarity of their car parts and mechanics that would be willing to work on them after an accident. You might want to think twice before buying a foreign car if you’re concerned about finding the money to pay for higher premiums and replacement parts.

  2. Model:
    The model of your vehicle, even if it’s an American car, says a lot about its value. A car can be offered in a variety of models, often referred to as trim or style levels. These levels can include something along the lines of SL (standard level) or LE (luxury edition). If you own a luxury edition of a vehicle, your premiums will probably be higher than someone who drives the standard version. Although car makers usually have their own names for the trim levels they offer, you can decipher them by reading reviews or descriptions available online. Overall, if you’re looking to spend less on insurance and don’t care what model car you drive, a basic four door is usually the cheapest option.

  3. Year:
    You may think that a newer car will be more expensive to insure than an older vehicle. However, some providers offer discounts for new vehicles specifically because they come with up to date safety and security features, such as car alarms and full frontal air bags. However, each provider sets different standards and savings for their discounts, so don’t assume that a few discounts will significantly bring down the cost of insuring your luxury vehicle.

  4. Car security:
    Most likely if you own an expensive car, you’re not only worried about higher insurance payments, but you’re also worried about it being stolen or vandalized. Luckily, many providers offer a discount if you install a car alarm or tracker into your vehicle. However, these discounts only apply if you have comprehensive coverage as a part of your policy. Comprehensive covers damages to your vehicle not caused by a collision with another vehicle. This can include anything from theft to glass damage to vandalism. Ask your provider about security discounts they can offer you based on your comprehensive coverage.

  5. Credit score:
    Unless you live in California, Massachusetts, or Hawaii, your credit score will affect your auto insurance rates. Providers claim there is a statistical correlation between a driver’s credit score and the number of accident claims they’ll file. Because of this data, insurance companies determine that drivers with lower credit scores will most likely get into more accidents. Therefore low credit score drivers are a larger risk to cover. Risky drivers are charged more for insurance because they’re a more expensive investment to the provider than a safe driver. Factors that impact your credit score negatively include past due payments, accounts in collection, a large amount of debt, or a short credit history. So before you buy a high end vehicle, check your credit score. If you have a low credit score and a luxury car you can’t necessarily afford, you probably won’t be able to budget for higher insurance premiums.

Your new car is a big investment and therefore needs the appropriate protection. Expensive cars usually lead to expensive premiums that include the additional coverages you need to protect your assets. If you own a valuable car, you most likely will need more than your state’s required minimum. Each state sets minimum coverage amounts for bodily injury and property damage liability, but these don’t include other coverages that would be important to cover you and your new car.

What kind of car insurance should my expensive car have?

  • Collision:
    This added coverage will pay for repairs to your car specifically caused by an accident. If your car is totaled, your insurance company will pay for the value of your vehicle at the time of the accident. Collision doesn’t pay for the original value of your vehicle due to deprecation over time. Older cars don’t necessarily need this coverage because their repair costs will most likely be more expensive than the value of the car as a whole. However, if you own a newer vehicle, collision will cover the expensive cost of repairs if you’ve chosen enough collision coverage.

  • Gap Insurance:
    If you noticed in the explanation of collision coverage, your insurance provider will only pay you the value of your totaled car at the time of the accident. Your car loses on average 11% of its original value the minute you drive it out of the dealer lot. After that, your car’s value drops by an additional 15% every year. Gap coverage can be a lifesaver if you have a loan or lease on your car and it gets totaled. Gap coverage will ensure that your provider pays the difference between what you still owe on the car and what the car is actually worth at the time of the accident. If you do ever find yourself with a totaled car and no gap coverage, you may end up paying the remainder of your loan out of pocket after you receive your car’s cash value.

  • Comprehensive:
    This added coverage will pay for repairs or the replacement of your vehicle if it's damaged by something other than an accident. This can include anything from hail damage to theft. This added coverage can be expensive, so vehicles with low monetary value that can be easily replaced, don’t necessarily need this coverage. However, an expensive car is more vulnerable to things like theft or vandalism and would be expensive to replace without this coverage.

Your new hot wheels may have been an impulse buy, but your car insurance policy shouldn’t be. While researching different providers and coverages can be time consuming, online quote comparison sites like Insurify.com allow you to customize, build, and buy your policy online in minutes. They partner with a variety of insurance companies to get you a range of policy price possibilities and are available to call or chat if you have specific questions about your policy or needs. You’ll be on the road in no time with the protection you need to truly enjoy your luxury car.