You’re paying too much on car insurance –here’s why
Insurance companies have teams of brilliant actuaries and data analysts working out exactly how to price premiums and calculate risk. The problem for consumers is that we can't always tell when we're paying a fair price.
For example, consider the difference between insuring your house and insuring your car. Your home is an investment — in ten years’ time, it should be worth a lot more than it is now. You’d expect your home insurance premium to stay the same price or even increase over the years. Even if the premium gets more expensive, you can choose to switch to a cheaper policy.
Car insurance is different. Your car is not an investment, it’s a liability. Every month, your car is worth less – it doesn’t appreciate with time.
So if your car insurance premium stays the same while your car loses value, you’re effectively paying more for your car insurance each month.
Click here for more Information
Why does my car lose value?
On the one hand, the answer to this question is obvious: as you drive, your car experiences wear and tear and becomes liable to break down, which is both a hassle and can require expensive repairs. It’s no surprise that something new and in mint condition is worth more than something older and worn down.
But if this depreciation is so obvious, why don’t we think about it when we price vehicle insurance? It’s because we think of cars for what they symbolise: even ordinary cars don’t feel like workday tools. They mean freedom, adventure and the spirit of the open road. Even if we just drive to work and back, we know that at any moment we could veer off and drive to the beach.
However useful your family car is, whatever freedom it gives you, as far as the market is concerned, it’s just a tool that gets you from A to B and it’s wearing down every day. It’s more likely to need expensive repairs every month and each season, there’s a newer, better, shinier model.
That’s fine. We buy cars because we need them. We might even grow to love them. But when it comes to being a smart consumer, the market isn’t sentimental, and neither should we be. Your car might mean more to you than its simple use value, but you can’t sell memories.
Do you think you are paying too much for your car insurance? Complete the below form and we’ll let you know what you should be paying!
