Old Car Insurance: Covering Your Aging Vehicle
Effective insurance for your aging vehicle
Is your ride getting older? You aren't alone. In 2012, the average age of cars on American highways reached an all-time high of 10.8 years. With more aging cars on the road, we are often asked whether it's less expensive to buy insurance for an old car. Simply put, it depends on your vehicle and your insurance coverage. While no automatic discounts exist for driving an older car, you may be able to adjust your insurance coverage and see some savings.
Insurance Premiums on Older Cars
Why don't insurance premiums naturally drop as a car ages? Older car parts may be more difficult to locate because they are no longer in production. When it takes longer to find a replacement part or the part is more costly, the overall cost to repair the vehicle increases. Higher parts and repair costs coupled with the ever-rising cost of general vehicle labor may keep insurance premiums the same, even as a car ages or decreases in value.
Removing Physical Damage Coverage: Cost vs. Risk
To help reduce insurance costs, owners of older cars often ask about removing Physical Damage coverage from their policy. Physical Damage coverage (often referred to as Comprehensive and Collision coverage) protects your vehicle if you are at fault in an accident or if your vehicle is stolen, vandalized or strikes an animal. Without it, you are responsible for costs to repair or replace your vehicle.
While there is no magic answer for when to remove Physical Damage coverage, some clients will make this change to their policy when their vehicle is 10 years old. Others remove Physical Damage coverage when the value of the car is less than the cost of the coverage. It's important to understand the regulations in your area, because some states require coverage, and there could be penalties if you remove it. Check with your local Department of Motor Vehicles to be sure.
Removing Physical Damage coverage may reduce your rates, but it also makes you responsible for repairs if you cause an accident. If you remove the coverage, you may want to set up a small savings account to cover repair costs if you have an accident. That way, you are prepared if something happens to your older car.