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Are Insurance Rates Different by Car?

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Joel Ohman
Founder, CFP®

UPDATED: Mar 13, 2020

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Insurance Q&A: “Are insurance rates different by car?”

Absolutely. Think of it this way. Insurers determine an auto insurance premium based on a few different factors. The vehicle (or vehicles) to be insured, the driver(s) and the desired coverage.

Knowing how insurance companies determine car insurance rates is a good way to tackle this subject in detail. But, for purposes of answering this particular question, let’s look at the “why” of insurance rates differing by vehicle.

Why the Car Matters

How much you pay for insurance is tied to the vehicle you are insuring…especially if you opt for physical damage coverage (including collision coverage and comprehensive coverage).

(What’s the difference between collision and comprehensive?)

The insurance company will have to shell out quite a bit more money to replace a totaled 2011 Cadillac CTS vs. a 2000 Nissan Sentra. Hopefully, there’s no further explanation required there.

As a result of the higher “risk” the insurance company is taking (replacing the Caddie vs. the Sentra), they are certainly going to charge you more money – all other factors the same.

Remember, you may choose higher auto insurance deductibles on more valuable cars as a way to lessen the blow on the premium. For example, you might select $1,000 deductibles on your Cadillac and go with the $250 deductibles on the lower-valued Sentra.

For the record, your bodily injury, property damage, uninsured motorist coverage, Med Pay and personal injury protection coverage amounts are “policy-wide,” meaning every vehicle on the policy has the same limits.

This is not the case for physical damage coverage, where you can change deductibles by vehicle (or opt not to insure a particular vehicle for physical damage at all).

What If I Have Liability Only Insurance?

You may still be charged more depending on the vehicle. In fact, you may be denied coverage by certain insurers based on the type of vehicle you drive.

For example, AAA Auto Insurance will not insure a Chevy Camaro (regardless of whose driving it) in Texas.

You see, each vehicle is assigned a “symbol” by the insurance companies. Each symbol translates to a rating factor (we’ll spare you the mathematical details) that’s applied to your overall premium.

Regardless of whether or not you choose physical damage coverage. Why?

Again, you need to follow the money here. Would you expect to pay more insurance claims on a Nissan 350Z or a Toyota Carolla. Bingo! You probably guessed correctly.

Don’t get too stressed out about the difference in rate. The vehicle’s symbol shouldn’t change the premium too much.

Just assume if a car is really expensive and/or sporty that it’ll cost more to insure than one that’s not when it comes to liability-only coverage.

The best way to ensure you get the most cost effective auto insurance policy is to get insurance quotes online and/or visit a local independent insurance agent.

Both these methods allow you to shop your premium with several different insurers at once.

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