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Pleasure cars should cost less to insure


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Question: I’m retired, live alone and have two cars.  My first car I drive less than 3,000 miles annually.  My second car is driven only 400 miles a year.  I want to insure my second car as a pleasure vehicle, but my agent of many years insists that will make the rates a lot higher.  I have excellent credit and a clean driving record.  How can I get good insurance rates on these cars? 

Answer:  Many car insurance companies will lower your rates, not raise them, for categorizing a car as a pleasure vehicle.  For this reason, compare car insurance rates with other insurance providers immediately.  You could potentially save thousands a year on your policy premiums by taking 15 minutes to comparison shop.

What insurers use to calculate rates

Car insurance companies’ rates vary greatly because each has its own rating system that weighs different risk factors differently.  Risk factors looked at also differ but typically include:

  • Age
  • Gender
  • Marital status
  • Driving record
  • Claims history
  • Years of driving experience
  • Credit history (in states that allow it to be used)
  • Geographical location
  • Vehicle type
  • Vehicle use (personal or business use and how many miles driven per year)
  • Coverage types, limits and deductibles

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If your agent is correct, then the rating system of your current car insurance company offers better rates for commuter cars than pleasure vehicles.  This is not the case with most insurers. 

Commuter cars typically are more expensive to insure because they are driven daily, have higher mileage and have more risk of being in an accident than a car you drive maybe once a month.

You may be able to categorize both of your vehicles as pleasure use since you drive because of being retired and not regularly commuting in either vehicle.

Lower rates for low-mileage and pleasure vehicles

Most car insurance providers offer a discount of 5 to 15 percent if you drive less than a certain amount of miles a year.  This amount varies, it can be under 7,000 miles with some insurers and under 12,000 miles with others. 

Both of your vehicles should qualify for a low-mileage discount.  If your current auto insurer doesn’t extend such a discount, it’s another good reason to look around for a new car insurance company.

As an example, I ran car insurance quotes for a 68-year-old single woman who is retired and living in your location of Lancaster, Calif.  I gave her two cars, a 2009 Toyota Camry and a fun pleasure car of a 1988 Porsche 911. 

I placed coverage of $100,000 per person and $300,000 per accident for bodily injury liability and $50,000 for property damage liability on each vehicle.  The cars also carried collision and comprehensive with deductibles of $500 each. 

When I categorize each vehicle for pleasure use with annual mileage of 3,000 for the Camry and 400 for the Porsche, the cheapest annual rate I found for the vehicles was $1,150.  I changed the Camry to a commuter car with 10,000 annual miles and kept the Porsche the same and the rates went up to $1,404 a year.

Your rates will obviously vary due to your own personal details, such as your age, the cars you’re insuring and the coverage choices you make.

Being a preferred driver gets you the best rates

You mentioned having excellent credit and a good driving record.  Both should help you become a preferred driver and get lower rates and/or discounts with many car insurance companies on top of reduction you should receive for the pleasure use of your vehicles and their low annual mileage.

Preferred drivers are what car insurance companies look for: low-risk drivers who pay their premiums on time.  Having continuous coverage going back several years will also help you get better rate quotes with multiple car insurance carriers.  You may miss out on a renewal discount with your current insurer if you switch, but that may be made up with a transfer discount with a new insurance company.

You can look at a couple of other options.

First, if your pleasure-use car is an older vehicle with sentimental value, you might want a policy from a specialty insurer known as an agreed-value policy. They are generally very inexpensive because the insured vehicle is typically used very little. (See "Insuring your keepsake car.")

You may even want to try a pay-as-you-drive (PAYD) car insurance program. 

With a PAYD program, a telematics device that plugs into your car will monitor your driving, such as how many miles and what time of day you drive, your braking and your acceleration.  If your driving patterns show you to be a low-risk driver, you can qualify for a good discount – up to 45 percent with some car insurance companies.

One last bit of advice: Don’t be afraid to change car insurance companies just because you have had the same carrier for several years. Your current insurer may be stagnant with its rates and discounts for you, while another carrier would hop at the chance of offering you much lower premiums with great customer service to obtain you as a preferred driver.

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