Quick answer
Your auto insurance rate can rise as your car ages because the premium covers much more than the car. It prices coverages like bodily injury, property damage, uninsured motorist, and medical payments, and it reflects the shared costs of a large, changing risk pool influenced by the overall economy.
Auto insurance rates can increase even as your car ages because the premiums cover more than just the vehicle itself. Rates reflect various coverages related to bodily injury, property damage, and other risks, as well as the shared costs within a large pool of insured individuals with varying risk profiles.
Key Takeaways:
- Auto insurance premiums include coverage for bodily injury, property damage, medical payments, and more, not just your car.
- Your insurance rate is influenced by the overall risk pool, which includes many other insured individuals with different loss histories and credit profiles.
- Economic factors and changes in the risk pool can cause your rates to rise regardless of your car’s age.
- Review all the coverages and their costs on your policy to understand why your rates may be increasing.
Why do my auto insurance rates keep going up even though my car is getting older? At The Oak Insurance Group, many of our clients ask this question so I would like to address it from a couple of angles.
First things first, even though it’s called car/auto insurance, it covers more than just your car. It should technically be called “auto-owners” insurance, similarly to how home insurance is actually called “home owners insurance”.
It’s important to understand that there are a lot of variables that go into insurance premiums, and with auto insurance, it’s no different.
The insurance company is much more concerned with you crashing into someone and causing them (or yourself) bodily harm, or death, than they are about your car. A car is a material possession which can be replaced.
A human life is not.
When is the last time you looked at your auto insurance policy?
If you look at it you’ll notice there are a lot of different coverages on your auto policy.
Bodily injury
Property damage
Un-insured motorist
Under-insured motorist
Medical Payments
Loss of Income
Funeral Expense
Loss of use
Rental Reimbursement
These are all things that you are covered for on your auto policy. How many of them have to do with your car?
None.
How many of them have a price next to them on your policy?
All of them.
Your car isn’t the only thing you’re being charged for on your policy
That’s because auto insurance covers far more important things than your car as mentioned above.
Let me re-phrase that: your car insurance rate isn’t just based on your car.
You’re not the only one…
It’s also important to understand that you are not the only person your insurance company insures. You are one fish in an ocean of other fish, sharks, and sea creatures, all who have different characteristics and risk profiles.
Insurance is all about spreading costs over a large number (risk pool) of people, which each person paying their fare share. That risk pool is constantly changing, and is impacted by a ton of different things, including the overall economic climate.
This means that you are sharing in the cost of millions of other people, many of whom may have poor loss history and/or credit.
That’s what insurance is though — sharing in the cost.
The next time your auto insurance rates go up, take a look at the big picture. Make sure you’re looking at ALL of the coverages, and corresponding rates.
Hope this helps! If you would like to know more about Car Insurance be sure to visit our page dedicated to it.
Keep Reading
- Auto Insurance from The Oak Insurance Group
- Why Car Insurance Costs Remain High as Your Vehicle Ages
- Why is uninsured and underinsured motorists coverage important?
- Auto insurance facts & statistics (Insurance Information Institute)
Frequently asked questions
Why does my car insurance go up when my car gets older?
Your premium is not based only on your car. Auto insurance bundles several coverages, such as bodily injury, property damage, uninsured and underinsured motorist, and medical payments, each with its own price. Your rate also reflects the overall risk pool and economic conditions.
What coverages are on an auto insurance policy?
Coverages include bodily injury, property damage, uninsured motorist, underinsured motorist, medical payments, loss of income, funeral expense, loss of use, and rental reimbursement. All of them have a price on your policy, even though they are not about the car itself.
What is a risk pool in auto insurance?
Insurance spreads costs over a large number of people, called a risk pool, with each person paying a fair share. The pool constantly changes and is affected by factors including the overall economic climate, so you share in the cost of many other insured drivers, including those with poor loss history or credit.
Why is auto insurance more concerned with injuries than my car?
The insurance company is much more concerned with you crashing into someone and causing bodily harm or death than with your car, because a car is a material possession that can be replaced and a human life cannot.
What should I do when my auto insurance rate goes up?
Look at the big picture and review all of the coverages on your policy with their corresponding rates, rather than only the car. Understanding what you are being charged for helps you ask your agent informed questions about why the rate changed.
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