My car is getting older–why aren’t my premiums going down each year?
Why didn't my car insurance premium go down? My car is getting older and it's depreciated in value. I didn't even have any accidents.
While this does ring true, insurance companies work a bit differently.
Why aren't premiums going down each year?
It's correct that as a vehicle gets older, the actual cash value the insurance company would pay also goes down. But, the majority of car accidents end up in a repair shop rather than a total loss and that is a main factor in determining your auto rate.
Consider this scenario–if you needed to get your 5 year old Toyota repaired, the cost is probably the same as the price of repairing a brand new Toyota. Also keep in mind that an older car could possibly cost more to insure than a new one, depending on how readily available the parts are.
Liability protection doesn't change year to year. Unfortunately, the costs associated with an accident or damage to another vehicle doesn't decrease.
Inflation is another factor. A cup of coffee last year might go up slightly this year from last year. Insurance companies also calculate inflation into their rates.
What can I do to lower my premium?
As your vehicle gets older and loses value, you may want to consider removing physical damage (comprehensive and collision coverage). Remember you only get the value of the car, minus the deductible, after an accident or theft. Take some time to calculate–if your car is only worth $2,000, it wouldn't make sense to pay $400 a year for collision and comprehensive. In a few years time you would've saved money to cover the cost of a total loss of your vehicle.
There are also possible discounts you could be eligible for, which include:
Multi-car discount
Multi-policy discount (auto and home with the same insurance company)
Occupation discounts (i.e. alumni, science/engineering degree)
Low mileage discounts (verification is required)