My Car Is Getting Older—So Why Aren’t My Insurance Premiums Going Down?
It’s a common question: “Why didn’t my car insurance premium go down? My car’s getting older, it’s depreciated in value, and I haven’t had any accidents!”
While it might seem logical that your insurance premiums would decrease as your car loses value, insurance companies calculate rates based on factors beyond just the value of your car.
Why Aren’t My Premiums Dropping Every Year?
It’s true that as your vehicle ages, its actual cash value (the amount your insurance company would pay in the event of a total loss) decreases. However, most accidents don’t result in a total loss. Instead, vehicles are typically repaired after an accident, and the cost to repair a 5-year-old car is often similar to that of a brand-new car. Labor costs, materials, and parts—whether for an older or newer model—can be comparable.
In some cases, an older car might even cost more to repair. If parts for your vehicle are harder to find or need to be specially ordered, repair costs can increase. Insurance companies factor this into their pricing.
Other Factors Impacting Your Premium
Liability Coverage Stays the Same: While your car may depreciate in value, the potential damage or injury you could cause in an accident remains the same. Liability protection, which covers damage to others, doesn’t decrease as your car gets older.
Inflation: Like many other goods and services, insurance rates are affected by inflation. The cost of repairs, medical bills, and car parts tends to increase over time, and insurance premiums adjust accordingly.
What Can You Do to Lower Your Premium?
Even though your car is getting older, there are a few strategies you can consider to reduce your premium:
Reevaluate Your Coverage: As your car depreciates, you might consider dropping certain coverages, such as comprehensive and collision insurance. These coverages pay for damages to your vehicle after an accident or in cases of theft, but they only pay out the car’s current value (minus the deductible).
Check for Discounts: You may be eligible for discounts that can help lower your premium. Some options include:
Multi-car discounts: Insuring more than one vehicle under the same policy can reduce your premium.
Bundling policies: If you have your home insurance with the same company as your auto insurance, you could qualify for a multi-policy discount.
Occupation discounts: Certain professions, such as engineers or teachers, may be eligible for reduced rates.
Low mileage discount: If you’re driving fewer miles annually, some insurance companies offer discounts. You’ll need to verify your mileage with the insurer.
It’s worth reviewing your policy annually to see if there are adjustments you can make based on your vehicle’s age and usage. Talk to your insurance advisor to explore what options are available to help lower your premium.