One of the most common questions I get asked is "My car is 5 or 6 years old and not worth what it was when I bought it, so why don't my rates go down?". There are three primary reasons:
1) The liability, uninsured motorist and Personal Injury Protection coverages are not a function of your car's age or value. As your car ages these premiums will not go down, in fact they tend to go up over time. The primary reason for this is that it costs more today to put people (medical expenses) and cards back together than it did a year or more ago.
2) You are right. Collision and Comprehensive coverages are a function of your car's value. I agree, it seems logical that as your car's value decreases your premium should decrease too. But let's dig a bit deeper. The insurance company is obligated to repair your car up to its actual cash value. A car is going to have a higher value when it is new than when it is 5 years old. However, most accidents are partial losses with repairs anywhere from a few hundred dollars up to several thousand. The insurance company is betting that an accident you have will only result in partial damage and not a total loss. As a result, the company still has to pay for the most likely partial loss to your car. Think about it, how often do you hear of a new car being totaled? It is rare.
3) Inflation plays a role too. Also, let's say you had an accident 2 years ago. The bill to repair your car was $2,000. Then again yesterday you had the exact same accident - same damage and same repairs (when will you learn?!?). Today's bill may be $2,100. So even though your car is worth less, the bill to repair the car is higher. The average cost of repairs is increasing and that too keeps premiums up.
Do not despair, there are several strategies available to lower your premiums. First combine your auto and home policies with the same company or at least the same agency. Most often the maximum discounts are achieved when we provide all of our client's insurance with the same company. But for some, a split between companies may yield a lower premium. If we are not handling your home policy now, let us take a look, we may be able to use this policy to leverage a lower auto premium for you.
Second, higher deductibles save premium dollars. In the past a $250 deductible may have been the maximum you wanted to risk. But now, with a bit of inflation over the years, and more years of driving experience, a $500 deductible may make sense.
Bottom line, want to talk insurance? CALL US! This is what we do all day, every day and we would love to hear from you.