why is auto insurance more expensive than value of my car?

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Rachel Bodine graduated from college with a BA in English. She works as an associate editor and writer for 4autoinsurancequote.com for over a year and enjoys creating content that offers expert advice on car insurance topics.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs...

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Reviewed byLeslie Kasperowicz
Former Farmers Insurance CSRhttps://res.cloudinary.com/quotellc/image/upload/insurance-site-images/4autoins-live/6ea5d860-leslie-kasperowicz.jpg

UPDATED: Mar 13, 2020

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The following is an exported forum post from our discontinued forum. If you would like to reply to this old forum post, please post a comment below.

My car is only worth $500, but i pay more than $1000 to insure it LOL

why is the insurance for the car so much higher than the car’s actual value? makes no sense

Our Answer

You’re certainly not alone! Plenty of drivers in the United States pay more for car insurance than their vehicle is worth.

It sounds silly until you realize that car insurance doesn’t just cover your own repair costs. It also covers damage you could inflict onto other people and property around you.

auto insurance more expensive than value of carLet’s say you’re driving 60mph down a street while checking your phone. You breeze through a red light and smash into the side of another vehicle. In this situation, it doesn’t matter whether your car is worth $500 or $50,000: the other driver will likely have significant injuries because of your actions. Fortunately, your car insurance is designed to cover situations like that.

Paying $1,000 per year for car insurance is approximately the average in the United States. Some drivers pay less and some drivers pay more, but $1,000 is a fair price to pay per year in most states.

However, we recommend checking your car insurance declarations page to verify you only carry liability insurance – not collision and comprehensive insurance. Liability insurance is designed to protect other people and property on the road. It’s legally required. Collision and comprehensive insurance, meanwhile, protects you against damage to your own vehicle.

You can safely drop collision and comprehensive coverage on a $500 vehicle. If your vehicle sustains any damage, the cost of repairing the vehicle will quickly exceed the value of the vehicle. At this point, the insurance company will declare the car ‘totaled’: it’s a total loss. Of course, most insurance deductibles are $500 to begin with, which means it will never be worth making an insurance claim under your own comprehensive or collision coverage. For all of these reasons, there’s no point in having collision and comprehensive coverage on a $500 vehicle.

Compare Insurance Quotes Online Today to Make Sure You’re Getting a Fair Deal

Paying $1,000 for car insurance doesn’t sound totally unreasonable. You didn’t mention which state you’re in, but that’s about average in many states – even if you’re only getting liability insurance on a vehicle that’s worth $500.

However, it’s also possible that your insurance company is taking advantage of you by charging higher insurance premiums. It’s possible that you haven’t compared car insurance quotes in years, and that other insurance companies in your area would be charging hundreds of dollars less for car insurance.

That’s why it’s important to compare quotes today. Use our own comparison form by entering your ZIP code. Or, visit the websites of insurance companies directly. Input your biographical information and vehicle information, then get a customized quote. If the amount is significantly less than $1,000, then it may be worth making the switch. If the amount is close to $1,000 or higher, then you have verified that you’re getting a good deal.

It’s Not Unusual to Have Insurance Premiums that Are Higher than your Vehicle’s Value

Ultimately, it’s not unusual to have insurance premiums that are higher than your vehicle’s value. You may pay higher insurance premiums than what your vehicle is worth if:

In the first case, your vehicle isn’t worth much, so even average insurance premiums will quickly eclipse the value of your vehicle. In the second case, a risky driver may pay $5,000 or more for car insurance, eclipsing the value of many vehicles.

$1,000 per year seems like a fair price to pay for car insurance. However, we recommend checking your car insurance policy to ensure you’re only paying for liability coverage (not collision and comprehensive, both of which are unnecessary on a $500 vehicle). We also recommend comparing quotes to make sure you’re paying a competitive rate for your area.

Enter your zip code below to view companies that have cheap auto insurance rates.

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Other Answers

Answer 1

You not only insure your car when you buy insurance, you also insure the damage that are you able to cause with it.  Let’s say you crash into a brand new Lambo with your 1999 Dodge Neon.  Won’t you be glad to have insurance then?

Also… that $1000 you say you are spending. Is that for one year, six months, etc?
And, what is the year/make/model of your vehicle?

Answer 2

The damage that done by your car is worth more then your car in any accident,that’s why the insurance is expensive.

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