Why over the course of time do insurance rates not accurately reflect the depreciating value of your car?

Question

Why over the course of time do insurance rates not accurately reflect the depreciating value of your car?

Answer 1

Because insurance premiums are not linked to the actual value of your car - Insurance premiums are linked to the INSURED value of your car.  If you want the premiums to go down, then you must decrease the amount of insurance you are carrying on your car.

.

Answer 2

The declining value of your car is just a fraction of the cost of insurance.The damage you can do or the injuries you can cause do  not  diminish if your car is showroom new, or 15 years old.

Answer 3

Because the labor costs to fix the damages don't depreciate.  

Also, most people don't KEEP a car long enough for it to depreciate low enough to notice a difference.

HOWEVER, if you insure a brand new 2008 Ford Focus, and you insure a 1998 Ford Escort (the equivelent back then), you'll notice a SIGNIFICANT difference in the collision and comprehensive rates.  That IS the reflection of depreciating difference.  

But if you're comparing a 2008 model and a 2007 model, you won't see much difference.  You need to look at a car at LEAST 5 years old to see the difference in rates.

See, this year labor might be $40 an hour.   Three years from now, although your car is worth less to fix, that dent is probably going to cost MORE to repair, not less.

The best way to cut costs on your car insurance, is to SELF INSURE.  Yep, pay that car off, delete the collision and comp, and then whatever happens to your car, YOU pay for it.  

Unless, of course, you can't afford to pay for it.  Then you're stuck with a car that's not drivable.

Answer 4

The first answer is very good.  But I will add that the biggest part of the cost is liability - not damage to the vehicle.  So you will only notice significant differences in price between a 1998 and a 2008 (like the example already given)

Answer 5

You can save money by increasing your deductable (making it less likely that you will file a claim), or dropping collision and comprehensive altogether, if you are willing to assume the risk.

I have 2 vehicles and am a good driver (autocross competition experience) and could get by if one was totalled, so I dropped collision/comprehensive on my older car and kept it on my newer Pathfinder that I need for winter (no loans).