Consider Auto Insurance Rates
When You Buy A Car
By Brad Stroh
This isn’t old news, but the type of car you buy effects your auto insurance
rates. The more expensive or high-performance your car is, the higher your
premiums will be. Why? It’s because the cost to repair a luxury or sports car is
often significantly more than it is to repair an economy car. It’s a matter of
mathematics. Less expensive automobiles are not as costly to repair if they’re
involved in an accident. For some higher-end cars and trucks, just to replace a
side-view mirror could cost a few hundred dollars.
How Rates are Set
Car insurance companies refer to the Insurance Services Office (ISO) when
establishing coverage costs. The ISO is a reporting group for the insurance
industry that publishes a statistical manual that rates vehicles based on the
manufacturers suggested selling price, its loss history (if the car is not brand
new), and in some cases the vehicles safety liability and theft level. The ISO
establishes a number between 3 and 27 for each vehicle. The number assigned
symbolizes the comprehensive and collision cost/coverage of that vehicle. The
higher the number, the more costly it is to cover that vehicle.
Now let’s look at a few examples. If you have a car that is considered an
economy car, yet the specific make and model you have has a high theft rate
(i.e. it is stolen more often than other cars on the road), the number the ISO
establishes for the car might be high. For sports cars, the ISO number is
normally high because the faster the car, the more prone it is to traffic
accidents; and in many cases, the cost to repair high-performance vehicles is
significantly more than other vehicles. Sport utility vehicles (SUVs) are also
weighed as high-liability vehicles. That’s because studies have shown that SUVs
cause more damage in an auto accident than a standard economy or sedan model. In
this case, some auto insurance providers increase the liability premiums for
high-performance cars and SUVs.
Before You Buy, Research
If you want to keep your insurance from skyrocketing, it’s a good idea to do
some research before you hit the dealerships. For starters, ask your existing
car insurance company for an estimate on a few makes and models you’re thinking
about test driving. The quotes you get back will give you an idea of how much it
will cost to insure those makes and models. Having those quotes in hand will
also help you keep your spending under control by reminding you that you also
need to consider insurance rates when estimating how much you can afford on a
new car.
Your age, where you live, and your driving record all play a factor in the
cost of your auto insurance. Of course, the ultimate factor is the type of car
you drive. The difference between insuring a four-door economy car will be
significantly less than insuring a high-priced sports car. So, if you’re
shopping for a new car, remember to keep your future auto insurance premiums in
mind. It will help you make a more informed and affordable choice.
About the Author: Brad Stroh is currently co-CEO of Freedom Financial
Network and Bills.com. If you would like more
of Brad’s articles, please visit the
Bills.com information on Insurance.
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