Why Do Auto Insurance Rates Increase the Older a Car Gets?

Many factors affect the price of your insurance premium. Although it may seem like your premium is increasing as your car gets older, there are other variables to consider, as well.Insurance companies are most concerned with you crashing into somebody and causing bodily harm. A car is a material possession that you can replace, while good health is not.For this reason, auto insurance covers more than just your vehicle. Rather than call it auto insurance, it should be called “auto-owners insurance.”

What Do Auto Insurance Policies Cover?

When was the last time you took a close look at your auto policy? If you haven’t, here is what's typically covered on an auto insurance policy:
  • Property damage
  • Bodily injury
  • Uninsured motorist
  • Underinsured motorist
  • Loss of income
  • Medical payments
  • Loss of use
  • Rental reimbursement
  • Funeral expense
  • Collision
As you can see, the only policy that has to do with your car is collision coverage. This shows how your vehicle isn’t the only factor in your auto policy.Insurance policies consider several things when determining your auto insurance rate. Although it may seem like your rate is increasing because your car is getting older, this might not be the case. If you face growing rates and don’t understand why that is, you should ask your insurance company.

Do Aging Vehicles Face Higher Insurance Premiums?

Now, you should understand that insurance premiums are made up of many moving parts. However, the age of your vehicle is another factor that can contribute to increased insurance rates.When it comes to your vehicle, a Florida insurance agency will calculate the probability that you will get into a car accident. After deploying an algorithm based on that probability, the company will calculate a premium. The insurance company will then evenly spread the premium out over the expected lifetime of the vehicle.New cars often get great deals on their insurance premiums. However, the insurance company will get a better deal as the car gets older. That’s why Tallahassee insurance companies will advise  their clients to assess if it’s worth keeping collision coverage on an older car.As a car gets older each year, your insurance company will reach out to the actuaries to determine whether the original algorithm was correct. If it were accurate, you wouldn’t see an increase in your premium because of the car's age. However, if the actuaries weren’t accurate in their risk calculations, you may see a rate increase.

Shared Costs

It’s also essential to know that you’re not the only individual your auto insurance company insures. The insurance company's goal is to spread costs over a large group of people, with each person    paying their fair share. The risk pool is continuously changing and depends on various economic factors.For example, as repair costs continue to rise, insurance companies will pass that cost on to their customers to remain financially stable.Insurance rates are important, but you also want to be with a company you can trust. If you plan on switching insurance policies, read through customer experiences, especially when it comes to filing claims.

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