Owning or leasing a car is more expensive today than in automobile history. Though gas prices are the usual culprit, you may not realize that you have considerable control over the cost of your insurance premiums.
When you purchase an automobile insurance policy from an agent, there are many behind-the-scenes actions that determine the rate of your policy’s premiums. After you leave your initial consultation with an agent, the agent consults with an actuary. This actuary statistically computes your risk to the agency, and thereby assigns you premiums based on that risk. Among the risk factors discussed between your agent and the actuary are your driving history, age, health, and credit score. What you may not know is that they also do research on the type of car you drive to find out that car’s incidence in accidents and thefts.
Each year, the Highway Loss Data Institute and the Insurance Institute for Highway Safety perform a joint research project on the insurance losses incurred by various makes of vehicles. In 2007, they found that small, fast convertibles are the leading make that causes traffic accidents. They found that these vehicles attract young drivers who enjoy the speed and maneuverability of small cars. Furthermore, these vehicles’ lower prices are often more affordable to young drivers than are trucks and SUVs.
To illustrate the popularity of small cars with young drivers, 35% of Scion tC drivers are under twenty-five years old. Other examples of high-speed cars enjoyed by young drivers include the Mitsubishi Lancer, the Acura RSX, the Subaru Impreza WRX, and the Nissan Sentra SE-R.
If you drive one of these cars and are over age 25, you may feel it is unfair to be paying higher insurance premiums because of younger reckless drivers—especially if you have a clean driving history and drive the car responsibly. Unfortunately, insurance premium calculations take into account the average accident rate of cars driven by nationwide insured drivers. Furthermore, most insurance agencies use the same statistical calculations to set their premiums. Therefore, you are out of luck if you’re seeking an agency that does not take into account the driving habits of those under 25. However, if you drive your small vehicle responsibly and incur no accidents for the next five years, it is a good bet that your agency will gradually lower your premiums.
Small, speedy cars are not the only vehicles subject to higher premium rates. Cars that have a strong history of theft also figure into higher rates. For example, the Dodge Charger has a history of frequent theft across the nation. This history has prompted insurance actuaries to attach higher premium rates to this car’s policies than for less stolen vehicles. If these vehicles were stolen, they would cost more to reimburse. In other words, actuaries raise these premiums as a risk-management strategy, to prevent the insurance agency from paying great money in case these vehicles follow the national trend and are stolen.
Predictably, vehicles that have lower rates of theft are less expensive to insure. Examples of vehicles with low theft histories include the Mercedes Benz E Class 4WD, the Buick Ranier, and the Subaru Forester. Their theft histories are so low that during 2007, merely .6 out of 1,000 insured vehicles were stolen. Because of this low theft incidence, insurance actuaries set premiums that are appreciably lower than those for frequently stolen vehicles.
What the least stolen cars have in common is that they are family-style cars. That is, they are mainly SUVs that have first-rate security systems and are typically parked in home garages. Furthermore, they are not often used for commuting to and from work, as with the majority of small sports cars. In addition, they are mainly driven by parents of young children who do not have reckless driving habits.
Insurance actuaries additionally take into account how many models of your car are currently on the road. For instance, the 1995 Honda Civic has a high rate of theft simply because it is one of the most commonly driven cars in the nation. In other words, this particular Civic model prompts higher premiums than other models of its brand because there are more insured vehicles of that model stolen per year.
Another premium-raising factor is your vehicle’s publicity. The Cadillac Escalade, for one, attracts thousands of thieves. This is largely because it has been featured on popular television shows and pictured with celebrities. The Escalade for 2007 had a whopping claim rate of 13.2 per thousand insured, all due to theft. Moreover, it is more common for thieves to steal the entire Escalade vehicle, whereas they more often steal parts from the equally expensive Lancer Evolution. Therefore, if you are driving a high-publicity vehicle such as the Escalade, be prepared to have costlier insurance premiums.
This assorted automobile data illustrates the benefit of putting more thought into the car you decide to own. Do your research before even thinking about financing your new car. Does the car have a high-desirability factor that makes it fair game for thieves? Does it have a high-peforming security system? Is it a fast car popular with young, reckless drivers? Putting yourself in this mindset will diminish the chances you are charged high premiums that drain your finances. If you do not have the means to pay for an Escalade’s annual $1,000 premium, set your eyes on a less frequently stolen vehicle.
To best secure your chances of obtaining lower premiums, consult with your insurance agent before you purchase a new vehicle. The agent can give you up-to-date advice on the cars whose average premiums are within your budget. You should also ask your agent if the vehicle has high repair costs, especially if you are going to be frequently commuting or driving in metropolitan areas. Becoming a more informed consumer will equip you with more power over your finances than you ever imagined.
