How does the Car Model Affect the Premium for Your Car Insurance?


The cost of insuring a luxury car is 18% higher than the cost of insuring a moderately expensive car. People across the world resist buying expensive cars because of an overarching insurance cost. The car makes and model is an important aspect of premium amount consideration. While assessing the final claim, insurance companies may provide full coverage deducting the amount of depreciation. Almost all car vehicles insurance companies provide liability coverage. Comprehensive and collision coverage is usually a choice that policyholders can make for themselves depending upon location, requirements, number of drivers, etc. Given below are ways in which a car model affects the insurance premium rate.

Luxury cars

According to the market definition, luxury cars are those which provide enhanced comfort, support, quality, etc. to the consumer. In social circles, any car which becomes a status symbol is considered a luxury car. Luxury car owners of Bentleys and Lamborghini refrain from buying average services or unbranded spare parts for the repair process. Therefore, insurance premiums for such cars are high. The request for add-ons by car owners also causes an elevation in car insurance premiums. For example- Add ons like depreciation and engine cover are requested by car owners to ensure 100% safety check.

Mid-range cars

Mid-range cars like Mercedes Benz and BMW 1 series are quite popular with the affluent class. The Consumers of this section are fans of value for money products. They want cars that provide better support, are aesthetically appealing, and are accountable to environmental standards. The insurance premium for mid-range cars is slightly higher than lower-range cars. However, it might increase in the future due to pandemic-induced changes in consumer sentiment and income level. A recent rise in lower-middle-class groups across the world has raised the demand for smaller SUVs. However, the demand will more likely rise after some time, leading to a decline in insurance premiums for mid-range cars as well.

Budget cars

Budget cars are quite cheap and supposed to fulfill the travel and transportation requirements of lower and middle-class individuals. These cars have significant popularity and enjoy lower insurance premium rates. Insurance companies and car manufacturers often tie up to provide significant premium cuts under government programs to induce the purchase. Budget cars include those of Maruti and Renault, which cater to lower-income groups with value for money features. Monthly premiums can be as low as $150, ensuring safe travel every day. 

People often wonder how and why budget car owners with significantly lower income levels purchase insurance policies and maintain them. Most people buy budget cars to support their business or for day-to-day tasks. Therefore, a one-time repair can be expensive in case damage occurs to the vehicle. Car insurance online policies help them reduce the cost of repair services and ensure liability coverage for any bad incident. 

Car owners must purchase a policy only after assessing the coverage. Most auto insurance companies that charge lower premium rates provide very minimal coverage and beyond average repair services. Such services can be very dissatisfactory for owners of luxury cars, inducing further damage in certain cases. 

Before we go further, it is important to consider the aspects which cause a rise in auto insurance premiums. 

The two biggest problems faced by customers while purchasing auto insurance are,

Finding reliable auto insurance companies 

Second, the yearly increase in premium rates

While the first one finds a great solution in the form of online websites selling auto insurance online, the second one is a bit tricky. Customers, being unaware, cast these insurance companies as trying to take undue advantage of customers. 

On the contrary, auto insurance experiences several ups and downs, leading to such variable premium rates in consecutive years. Here are a few reasons to explain the steady rise in auto insurance premiums.

Reasons to explain the rise in auto insurance premiums

Auto insurance premiums depend on several factors. From the number of drivers responsible for the car to the driving habits, the premium rate is decided after accounting for every factor. Even the geographical terrain is assessed before arriving at specific premium numbers. Such yearly increases can affect insurance options for several people, sometimes even pushing them to take serious action like using public transport. However, acute observation has brought forward the rational algorithm behind such an increase.

Increase in insured declared value of the car

IDV or Insured declared value of the car is the maximum price your car can avail in the market if being sold. Higher IDV means higher premium rates. Similar is the case with luxury and premium cars, whose premium amount can be a lot higher than the basic car.

Number of claims filed

This number gives the insurance provider a peek into your driving habits, geographical terrain, no. of external drivers, lackadaisical driving attitude, etc. It is one of the biggest reasons for car insurance companies to increase the premium rate every year. Higher claims in the last year will prompt the insurance provider to increase the insurance premium for the next year. The higher the risk associated with insurance, the higher the premium amount. 

Cancellation of insurance

Car owners often fail to keep up with insurance premiums, which lead to a policy fallout. If a user fails to renew the policy during the grace period, it could lead to a significant premium increase while seeking new auto insurance online. This is because car insurance companies seek the best premium rates for long-term customers.

You selected the wrong coverage for your car

While buying insurance coverage for your car, owners often seek comprehensive plans to cover any possible damage in the future. Law agencies and lienholders also make auto insurance policy coverage a mandatory condition. However, repeated use and depreciation should act as a sign for owners to change their auto insurance plans. Looking for custom-designed auto insurance plans from online websites is the next best step as it allows real-time comparison among different quotes.  Car insurance policies prove to be a major savior in tough times. They not only save you from immediate expenses but ensure financial stability. Insurance premium rates can increase sometimes but informed decision-making can help save on premiums in the long run. Choosing the right policy type based on your location and weather condition is highly recommended.

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