“Not cool bro! Why does my rate go up when my car is getting older??”
I literally get this question 2 or 3 times a week, so of course, I wanted to address it here for all of my readers.
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”.
As I’ve mentioned before, 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 can be replaced. A life, might not be able to.
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?
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, and 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 have poor loss history.
That’s what insurance is though — sharing in the cost.
The next time your car insurance goes up, take a look at the big picture. Make sure you’re looking at ALL of the coverages, and corresponding rates.
Hope this helps!