As my car's value drops why doesn't my auto insurance go down?

My car is getting older- Why doesn’t my auto insurance go down?

Scott Tharp Auto Insurance, Uncategorized Leave a Comment

One of the most common questions we get in the agency is “Shouldn’t my auto insurance go down as my cars value goes down?”. This is an excellent question and is pondered by anyone who has ever made a car insurance premium payment. The answer is two fold.
If the only type of accidents that occurred were total losses (whereas the vehicle was completely “totaled”) the argument would be 100% correct and valid. It would make insurance incredibly predictable. As the cars value dropped, the auto insurance premium would go down equally- as a percentage of the cars value.
However, 88% of auto insurance claims are NOT total losses. That means, the car will be repaired to its pre-accident condition. Calculating the cost to repair a damaged vehicle does not correlate with the current value of the car in any way. The repair estimate simply calculates the replacement parts and the labor cost to remove damaged parts and install the new components. Finally, the repair estimate includes matching paints, pin-stripping and other last minutes touches. The auto body repair business has a high cost structure, which like any business, usually goes up over time.
Lastly- where you live impacts the value of your vehicle. If you live in Ann Arbor 48103 48104 48105 48108 , Dexter 48130 , Saline 48176 or Whitmore Lake 48189 your vehicle may be worth more or less than a vehicle in Grand Rapids or Chicago. Like anything else, supply (and demand) drive vehicle values.
What WILL HAPPEN over time is a higher likelihood that your vehicle WILL be totaled in the event of a loss. If your vehicle is 10 years old with a $2500 value- even a small fender bender could result in a “total loss” situation. When an estimate is written up, using the process described above, it doesn’t take long for an insurance company to decide to pay the client the market value of the vehicle vs. trying to repair the car. This is something to consider when you vehicle gets older… Is full coverage really worth it? Your car may mean a lot to you personally but does its KBB value justify the full coverage expense? Food for thought. Call Michigan Insurance Partners LLC in Ann Arbor or visit our Auto Insurance page for a quote today!

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