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Why doesn’t the cost of insurance decrease with the value of my vehicle?
Does car insurance go down as your car gets older? I’ve had my car for 10 years and noticed my insurance premium is higher than I used to pay. Shouldn’t the price be proportionate to the replacement cost of the car?
Shannon Martin · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
This is a common misconception, but the cost of car insurance doesn’t necessarily decrease with the value of the vehicle. While your vehicle’s value is a factor in determining your insurance premium, it’s not the only thing insurance companies consider—your location, driving history, and demographics can also impact the rate you pay.
Even though
collision coverage
and comprehensive coverage
pay for damages to your vehicle up to the actual cash value of the car
—which decreases over time—they also help cover the cost of labor and parts to fix your car, which has been increasing over time.If you own an older vehicle that has depreciated, one way to lower your premium is to consider dropping nonessential coverages like collision and comprehensive, which are unlikely to be mathematically worth it for older cars.
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- Gregory R.
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