How Is Your Auto Insurance Rate Linked To Your Vehicle?

Here’s what you need to know about auto insurance before you splurge on a new ride. It is well known that your insurance rate depends on the type of car you buy. If you purchase an expensive, high-performance car, you can be sure that your premium will be high. This is because luxury, high-end, high-value cars are more costly to repair in case of an accident than a regular economy car. Spare parts for high-end vehicles are most often more expensive than spares for cheaper cars. A small spare like a rearview mirror on a luxury car or high-end truck could easily set you back a few hundred dollars. 

How Do Insurance Companies Establish Premium Rates?

The Insurance Services Office (ISO) publishes a statistical manual that car insurance companies refer to when setting insurance rates for each car type. The ISO rates vehicles on various factors like the suggested selling price set by the manufacturer, it’s loss history if the car is not new, safety features and liability as well as how appealing the car is to thieves. The rating is established for every vehicle as a numerical value between 3 and 27. This value assigned to a vehicle is representative of overall and collision cost and coverage for that particular vehicle. As the ISO number is directly linked to the insurance premiums, if a vehicle has a very high number, its coverage value will be higher too. It is also possible that a car that is considered an economy car could have a high insurance rate. Let’s see how this could happen. Assuming that your economy car is of a specific make and model that is highly appealing to thieves; that is, it has a higher theft rate, the ISO number for that particular car would be high. This is because there is a higher probability that the insuring company would have to pay out a claim if it is stolen. In this case, the premium rate to insure this specific car would be high. Sports cars by nature are fast cars and are therefore more prone to accidents. Given that most sports cars are costly to repair compared to other vehicles, their ISO number and insurance rates are considerably higher. Studies in automotive accidents have shown that sport utility vehicles or SUVs cause more severe damage when in an accident than other smaller economy models. In these cases, liability premiums are increased for SUVs also.

Do Your Homework Before Buying A Car

Doing your research before signing the dotted line for a new set of wheels could help you save a significant amount on insurance premiums. Requesting quotes on a few models that you are interested in, will allow you to understand how much it will cost to insure them. Factors like your driving record, age, and the residential area also contribute to the total cost of insurance for your vehicle. Keeping future auto insurance premium costs in mind will help you make a better-informed decision while buying a new car or truck.