Insurance for older cars
Your car's age influences your car insurance rates. Your car insurance premium may fluctuate as you get older. Car insurance companies consider not only the age of your vehicle, but also the make and model. The StrongInsurance expert editorial team has the answers if you're wondering how to insure your older car and what you can do to get cheaper insurance.
Is it more expensive to insure an older car?
While new cars are sometimes thought to be more expensive to insure due to their value, older cars may also be costly. Although older cars may have a lower value, they may also have expensive parts that could make repairs costly. The older a car gets, the more difficult it may be to find these parts for repair, which can raise the cost of car insurance on older vehicles. Furthermore, older vehicles may lack as many safety features as newer vehicles, raising the cost of auto insurance and reducing available discounts.
Because each insurance company has its own rating structure, premiums for each make and model vary. The cost of repairing a vehicle, as well as its anti-theft and safety features, are all considered when calculating the final premium. In some cases, an older car may be less expensive to insure than a newer one because it does not require full coverage if its value has depreciated significantly.
Vehicles with low depreciation
A brand new car can lose 10%-20% of its value in the first year, and 15% each year after that. A vehicle may be worth around 40% of its original purchase price after five years. Many drivers consider depreciation when purchasing a new car, but few realize that depreciation can also affect their car insurance premium and coverage options.
While all cars depreciate, some makes and models depreciate at a slower rate than others. The Toyota Tundra, GMC Sierra, and Toyota Tacoma were named some of the best value-holding vehicles of the year by Kelly Blue Book.
If you're thinking about buying an older car, you can get a quote and compare the estimated premium to the car's value to see how much coverage you'll need.
What kind of insurance do I need for an older car?
If you own an older vehicle, you may be wondering, "Do I need collision insurance on an older vehicle?" or "Do I need comprehensive insurance on an older vehicle?" Neither option is a standalone insurance policy, and whether to purchase collision or comprehensive coverage is entirely optional. However, other factors may influence the decision. To satisfy the terms of your loan or lease agreement, the lender may require you to carry these coverage types if you have a loan on your old car. When it comes to auto insurance, you have more options if you own an older vehicle.
Comprehensive and collision coverage are two types of physical damage coverage that can pay to repair or replace your older vehicle if it is damaged in a covered claim. You may not need either coverage if you can afford to repair or replace your older car without insurance. If you cannot afford it, you may want to keep these coverage options to protect your finances. The 10% rule is a general rule of thumb used by insurance professionals when deciding whether to maintain physical damage coverage. In this case, if the coverage exceeds 10% of the car's replacement value, it may not be worthwhile to keep the coverage.
No matter how old your car is, you must carry state minimum liability limits or demonstrate financial responsibility in order to register it and legally drive on public roads. Each state has its own requirements, which must be met and maintained for the duration of the vehicle's registration and tagging. Most insurance experts recommend that if you can afford more than the state minimum liability insurance, you get more financial protection.
State minimum insurance
State minimum insurance is the bare minimum of liability coverage required to register and drive your vehicle. Personal injury protection (PIP) or medical payments, as well as uninsured motorist coverage, are also required in some states. You could go to the National Association of Insurance Commissioners (NAIC) website, click on your state, and then click "visit website" on the right side to go to your state's insurance website to determine the minimum amount of coverage required in your state.
An example of Alabama's state minimum insurance requirements:
- $25,000 for bodily injury per person
- $50,000 for bodily injury per accident
- $25,000 for property damage per accident
These are the maximum amounts that your insurance company will pay if you cause an accident that causes injuries or property damage to others. In some states, you can be sued for anything above the limits, so it's important to get as much coverage as you can afford.
Classic cars vs. older cars
While a classic car is an older vehicle, there are significant differences in the types of coverage available for each. Auto insurance for older, non-classic vehicles is typically available as part of a standard auto insurance policy. A classic car, on the other hand, may be insured under a specialty insurance product that provides unique coverage not found in the average policy.
A classic car is typically 20 years old or older and has collectible value that exceeds the original purchase price. Even with additional features not available with standard auto insurance, classic car insurance is usually less expensive. Some insurance companies only offer coverage as part of a specialty auto insurance policy, while others include it as part of standard insurance coverage.
Insuring a classic car
When insuring a classic car, consider the available coverage options, such as restoration and spare parts coverage. If you take the car to shows, there may be additional coverage for trip interruption and other expenses.
Some insurance companies give you the option of selecting between agreed value and stated value. If the car is damaged or totaled, you may receive either the cost of repair or the agreed value, whichever is less. The stated value option allows you to select the amount of coverage, which may be less than the car's value but may limit how much you receive if the car is damaged.