Insurance Premiums By Car Type

by John S Kiernan

WH-2014-Study-Car-Insurance-by-Auto-TypeIn addition to being the unofficial start to summer, Memorial Day is also the year’s busiest weekend for car sales and the kick-off for a three-month span in which 27% of all annual car sales are recorded. With that in mind, WalletHub continued its analysis of the car insurance landscape in search of insights that may help consumers make more informed decisions when they hit the car lot.

As we reported in our 2014 California Car Insurance Landscape Report, car insurance premiums are driven by a number of factors – from one’s driving record and city of residence to the historical characteristics of area drivers. In this report, we focused on how car insurance premiums vary depending on the type of car you buy, how old it is, how much it costs, and who makes it. You can check out our findings and the methodology we used to conduct this report below.

Key Findings

  • It is wrong to assume a perfect correlation between the price of a car and the insurance cost. Insurance premiums for cars in the same price range can differ by as much as 26%. And we find the variation in insurance premiums actually increases for more expensive vehicles.
  • Based on our regression analysis, only about 25% of the variation in insurance premiums across car types can be attributed to differences in car price.
  • New sedans are almost $130 cheaper to insure than 3-years old sedan cars on average, after accounting for variations in price.
  • In terms of body type, sports cars are the most expensive to insure, followed by trucks.

Relationship between MSRP and Insurance Premium

Annual Insurance Premium by Auto Type

 

Annual Insurance Premiums New vs. Used Cars

Methodology

We reviewed premium data from the California market, based on the assumption that while specific values will obviously vary by state, the key relationships between car type and car insurance premiums will hold true nationwide.

Our premium data comes from seven auto insurance companies, which collectively represent 38% of the total California market. These insurers are: Allstate Insurance Company, Geico General Insurance Company, Mercury Casualty, State Farm Mutual, Progressive, SafeCo, Farmers Insurance Exchange.

We chose cars from the current product lines of major U.S. manufacturers and, unless noted otherwise, chose options with basic features. We then grouped the cars in different price ranges for the “By Price” analysis. For the “By Auto Type” analysis we choose car manufacturers that offering all four of the following auto types (sedans, crossovers/SUV’s, sport models and trucks), aiming for choices in the same price range. We then conducted a “new vs. used” analysis, matching 3-year old sedans with newer models in the same price range and comparing their insurance premiums.

Insurers use multiple variables to determine auto insurance pricing. In order to assess the impact of a consumer’s choice of car on the price of insurance, we used a base case, as defined below in the analysis of this report.

Our “base case” assumes the following details about the driver:

Base Case – Experienced Female Driver

woman figure

Traffic violations: No violations
Annual Mileage: 16,000
Licensed: 21
YearsAge: 37 Years
Marital Status and Gender: Single Female
Employment Status/ Profession: Unemployed
Membership in organization: No membership
Commute to work: 20 miles each way
Days per week: 5 Days
Zip Code: 94561

Our base case includes the following insurance coverage details:

  • coverage of $50,000 for injury/death to one person,
  • $100,000 for injury/death to more than one person and $50,000 for damage to property,
  • medical coverage of $1,000 (MED),
  • coverage for collision with uninsured motorist of $30,000,
  • collision with underinsured motorist of $60,000 (UMUND),
  • $1,000 collateral coverage (COLL) and
  • $1,000 comprehensive coverage (COMP)

 
Sources: WalletHub Car Insurance Comparison Engine, Kelly Blue Book, NAIC, Cars.com and Car Manufacturers Websites.

Author
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John Kiernan is Senior Writer & Editor at Evolution Finance. He graduated from the University of Maryland with a BA in Journalism, a minor in Sport Commerce & Culture,…
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