TAGS
As my car loses value, why doesn't my renewal premium drop too? Each year the value of my car depreciates, shouldn't this mean my car insurance is cheaper each year too? It is perfectly logical to assume your insurance premium will decrease year on year to mirror the reduced value of your vehicle. Unfortunately it doesn't quite work out this way and there are several reasons why.
Firstly, a car that is a few years old will cost just as much to repair as a new car should it be involved in an accident. The cost of spare parts and the labour cost will not go down that rapidly.It is even possible due to the reasons listed below, that your premium will increase over the years.
If when you purchased your shiny new car from the forecourt you were offered a new car discount of up to 10 percent for a period of up to 3 years, you can certainly expect to pay more once this period comes to an end. You may own a vehicle that is particularly attractive to thieves in your area. The cost of repairs and parts may increase. As newer models are released year after year it can become increasingly difficult to locate suitable replacement parts. Insurance companies will charge more to cover this possible scenario.
Your make of vehicle may have a reputation for regularly being involved in incidents, so claims may be particularly high. By looking at information supplied by the Highway Loss Data Institute (HLDI) insurers can find out how often claims are made for a certain vehicle, and how much has been paid out.
Even if your vehicle is several years old, if it has a high claim average the insurance may be higher than that of a newer model with a lower claims average. As I am sure you are aware many other risk factors are considered by an insurance provider when they calculate your premium. Therefore any changes from one year to the next will change your price too. If you move house, change jobs or travel more frequently your policy will reflect these alterations.
The only way to be sure you are receiving the best rate for ypur circumstances is to compare the quotes of several insurance companies. Each company uses a different system to calculate risk and arrive at a quotation so the results may vary widley. On thing to consider if your vehicle is old and you have paid for it in full is the possibility of dropping coprehensive insurance. You may be paying high premiums for a vehicle that is not worth repairing following an accident.
.
