The surprising reason why a cheaper car could cost more to insure
There are many factors that affect the price of auto insurance, including which car to insure.
Typically, it costs more to buy coverage for more expensive vehicles. This is because the auto insurance company would have to shell out more money if the car was stolen – and the risks of theft may be higher.
More expensive cars usually also have expensive parts, which means repairs can cost more if something goes wrong. And if the car is a total loss, the market value of the more expensive car would be higher, so the insurer would pay more again.
But there are exceptions to every rule. A cheaper car is not always the cheapest car to insure. In some cases, it might actually cost less to purchase insurance for a higher priced vehicle.
It all depends on the loss history of the car.
Insurance companies take risk into account when setting prices
Insurers look at a lot of data to assess both the likelihood of paying a claim as well as the amount they might have to pay if something goes wrong.
Some of this data relates to the history of claims for each specific type of car in the market. In fact, individual insurance companies provide data about the vehicles they insure to a Comprehensive Loss Underwriting Exchange (CLUE), which creates a record of the insurance losses associated with each vehicle. Insurers then use this information when writing premiums, which is a fancy way of saying âassess riskâ.
If insurers find that there are more claims – or more costly claims – they will increase premiums for motorists with this vehicle.
Drivers could end up paying more to insure an inexpensive car model if:
- It is involved in more accidents than most vehicles
- It is stolen more than most vehicles
- People tend to suffer very serious injuries when they are involved in an accident – possibly because of a lack of safety devices.
In comparison, a more expensive car with excellent crash avoidance features and plenty of safety features that make serious injury less likely could end up costing much less to ensure than a cheaper car with a history of problems. .
It may pay to shop around for coverage before buying a car
Most motorists do not know the loss history of the vehicles they are considering purchasing. After all, it’s a pretty technical metric. And since drivers can’t rely on the fact that a cheaper car is always cheaper to insure, it’s a good idea for drivers to get some insurance quotes. before to buy a car.
You see, insurance companies will allow people to get quotes even for vehicles they don’t yet own – just enter the driver’s information as well as the make, model, and year of the vehicle. So drivers who choose between a few different cars can go and see if a particular vehicle would end up with much higher (or lower) premiums.
Since drivers will keep auto insurance coverage for the entire time they have their car, it’s just a good idea to factor in the cost of insurance when deciding which vehicle to buy. It only takes a few minutes to get quotes, and it could end up generating significant savings over time.