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Does the type of car affect my insurance rates?

A compact car model
Here's what you need to know...
  • When you’re shopping for a new car, you need to keep in mind more than just the purchase price
  • You will need to compute the total cost, including gas and insurance costs
  • You might have to make some adjustments to your policy so your new car not to raise your insurance premiums
  • Always get quotes from several companies to find the best deal on your new vehicle

When experts talk about the total cost of ownership of a vehicle, they are computing how much money it will cost you to drive and maintain the vehicle, not including the purchase price.

This includes extra expenses such as:

  • Depreciation
  • Finance charges on the loan
  • Taxes or fees
  • Repair
  • Maintenance
  • Insurance

Fortunately, there are many ways to keep insurance costs down.

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How does the kind of car I buy affect my premiums?

Keys on a dashboard,

The two primary factors in determining the cost of your car insurance are your personal statistics, like age and driving record, and the type of car you drive.

The smartest thing to do when car shopping is to get car insurance quotes for the car before buying it.

Your car insurance company will be happy to tell you exactly how much a particular vehicle will affect your insurance with no obligation. This will allow you to determine if your budget can handle both the car payment and the insurance payment.

If you want to narrow down the search, try websites like Edmunds.com. Every year these sites list the least expensive models to insure in a particular category.

Also, remember that even the type of vehicle can affect insurance.

Any two-door coupe will probably be categorized as a sports car. Any car in that category will be more expensive to insure than a four-door sedan. Luxury cars also cost more because they are more expensive to repair or replace.

As a general rule, brand new cars cost more to insure than used ones simply because they cost more to replace if the car is totaled.

Vehicles with high safety ratings will cost less to insure than ones with low ratings. You can always see a vehicle’s safety record by going to the Insurance Institute for Highway Safety’s website.

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Can I adjust the policy?

The type of policy you have will also play a big part in your insurance costs. If you are taking out a car loan to buy the car, the lending institution will require that you carry comp and collision in addition to the state-mandated liability.

To keep the premium costs down, consider raising the deductible. If you are currently paying a $250 deductible, consider raising it to $500 or $1000.

Your agent can tell you exactly how much this will lower your premium. If you do this, make sure you put enough money to cover that deductible into a bank account.

You will not save money if you can’t cover a large deductible if you wreck your car.

If you are keeping an older car when you buy this new one, you could drop comp and collision on it if it is paid off. Experts only recommend this if the car’s total value is worth ten times the premium cost for comp and collision or less.

For example, if the car is worth $4500 and comp and collision costs $50 a month, then you could drop the extra coverage.

How else can I lower my premiums?

Stacks of coins next to a calculator

There are other ways you can lower your premium. Buy all your insurance from the same company:

If the company offers life insurance, you can even group that with the property insurance. Most companies will discount every single policy you have with them if you buy multiple policies.

Make sure your agent is giving you credit for all of the discounts to which you are entitled. Have a full list of all the safety features of the car, as those can provide discounts as well.

Remember, you are not required to stay with the same insurance company. Compare prices of several different providers.

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