Does the age of a car affect your car insurance coverage?

Selecting the type of auto insurance coverage that’s right for you is a big decision and may need to be revisited many times throughout the life of your car. How much you pay for this insurance depends on the age of your car, the type of car and possibly its safety features.

If your premium is higher than you expected, there are ways to reduce your costs, including eliminating all unnecessary coverage. Especially as your car ages, it’s important to review your policy to understand which policies are mandatory for purchase and which may be excessive.

How does the age of a car affect insurance premiums?

The age of your car is taken into account by your insurer when calculating your insurance premium since they can determine what types of coverage may be required.

For example, a new car may qualify for optional New Car Replacement Coverage, which is not available for older vehicles. On the other hand, an older car that has a lower value might not need comprehensive and collision coverage.

Aside from age, several other factors affect each individual’s auto insurance calculation, says Bronwyn Koopman, auto product manager for Farmers Insurance, including:

Once your auto insurer has determined what coverage is needed for your vehicle, they determine how much it will cost. Factors considered when calculating your car insurance premium include:

Insuring a new or used car

There is no set policy for a new car as opposed to a used car. But your coverage may be different depending on whether you financed the vehicle or purchased it outright, such as adding gap insurance, which helps pay off your current car loan if your car is destroyed or stolen.

New car: Buying a new car is a huge financial investment, and insuring your vehicle helps protect you against unexpected costs, should the unexpected happen. For this reason, drivers can opt for comprehensive auto insurance coverage on their new vehicle, which refers to adding all-risk and collision damage waiver on top of your coverage required by the state or lender.

There are several types of auto insurance coverage you can add beyond that, such as new car replacement coverage to your insurance policy on a new vehicle, which helps cover the difference in cost between a version deprecated and a new version of the same vehicle. It is important to remember that accepting any type of additional coverage will increase the overall amount you pay for your car insurance coverage.

Used car: If you purchased a used vehicle that exceeds the age and mileage limit for New Car Replacement Insurance, you do not need to purchase the optional coverage. Typically, states require new and used cars to carry a minimum amount of auto coverage, which includes liability coverage for property damage and bodily injury and sometimes personal injury protection.

But as your car ages, you may wonder if it’s worth continuing to pay for comprehensive and collision coverage, which helps pay for damage to your vehicle. Generally, if your vehicle is over ten years old or worth less than $4,000, you may want to consider removing this additional coverage.

Paying for comprehensive auto insurance coverage on an older vehicle may not be the best use of your money, especially if the actual cash value of the car is less than the cost of insuring the vehicle. If this is your case, consider consulting with your experienced local insurance agent to find out which insurance coverages are right for you, Koopman says.

How is car insurance calculated?

Auto insurance can be calculated using a variety of factors regarding your individual vehicle and may vary depending on your insurer.

Typically, most insurance companies determine your car coverage based on the age, make and model of your car, as well as safety features like a rear view camera or a monitor that warns you that There’s a vehicle in your blind spot, says Koopman. But other factors to consider include:

Your age: Generally, older drivers are involved in fewer crashes than younger drivers. Because of this increased risk, insurance companies charge more to insure drivers under the age of 25.

Your gender: On average, men tend to pay a bit more for car insurance than women. This is likely because men are more prone to take risks behind the wheel, such as driving fast and not wearing a seatbelt, which can lead to higher rates of serious car crashes, according to data from the Insurance Institute for Highway Safety.

However, the gender price gap actually decreases as drivers age.

See this interactive chart on Fortune.com

Your credit: Insurers consider your credit-based insurance score as a way to know in advance if you will file a claim for your vehicle and, if so, how much that claim might cost. To determine this score, your insurer takes into account information from your credit file, such as unpaid debts, bankruptcies and the length of your credit history.

Your driving record: If you’ve been involved in multiple accidents or traffic violations, your driving record may be flagged as a risk to your insurance agency and may increase the amount you pay for coverage. On the other hand, a clean driving record is less risky to insure and can save you money on insurance premiums.

How often do you plan to drive your car: If you plan to put a lot of miles on your vehicle, there is a greater risk of being involved in an accident or sustaining damage to your vehicle. Because of this, auto insurance companies may charge you more. If you only plan to drive once in a while, your insurer may give you a small discount on your premium.

Where you plan to drive your car: Your insurance company will consider the location of your vehicle to calculate the likelihood of accidents, theft and vandalism. As a general rule, residents of large cities pay more for their insurance than those of rural towns.

What type and amount of car insurance you have: The cost of your insurance policy can vary depending on your coverage limits, your deductible and the types of auto coverage included in your policy.

Factors that can lower your rate

If your insurance premium is higher than you would like, there are ways to reduce the cost.

  • Request quotes from multiple car insurance companies

  • Compare vehicle insurance costs before you buy

  • Buy safety features, like a backup camera or collision warning technology

  • Consider an increased deductible

  • Reduce your coverage on an older vehicle

  • Take advantage of discounts for safe driving

The take-out sale

When determining what auto insurance coverage is necessary for a used or new vehicle, “there are many factors to consider, including the value of your vehicle and your ability to absorb the cost of your vehicle in the event of total loss, whether due to an accident or if your vehicle is stolen,” says Koopman.

It’s also important to keep in mind that no matter how old your vehicle is, there is a minimum auto insurance coverage required by your state. Optional coverage for new or used vehicles can be helpful in protecting you from potential financial ruin in the event of an accident.

This story was originally featured on Fortune.com

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