Why does adding a third car without coverage significantly raise our premiums?
We currently have two cars and two drivers. My teen has a learner’s permit, and we’re planning to purchase a budget-friendly used car. I just received a quote to add this new car, and even without coverage for it, our rates will increase by around $600 per year. Our liability coverage remains unchanged, and there won’t be collision or other types of coverage on this particular vehicle.
I understand that when we eventually add the teen to the policy, rates will increase dramatically. However, I’m puzzled as to why adding a low-cost car without coverage would lead to such a significant premium hike. In the event of an accident, the insurance company wouldn’t need to cover any damages for this new car.
I’m just curious about this situation because I didn’t expect the increase to be this drastic.
Edit: To clarify, we haven’t added the teen to the policy yet; this premium increase is solely for adding the third car to the existing two drivers. The teen will be added in a few months.
Edit 2: I’m not expecting the addition of a third car to be free, but I’m surprised that it accounts for 33% of our current coverage cost. We’re currently paying about $1,700 a year with a $100 deductible for collision and comprehensive on our 2015 and 2023 cars, so an additional $600 for a third vehicle that won’t have collision or comprehensive coverage seems excessively high, especially considering we haven’t even factored in the teen yet.
It’s puzzling, isn’t it? A few factors may contribute to such a significant increase in your premium when adding a third car, even without coverage on that vehicle.
Risk Assessment: Insurance companies assess risk based on a variety of factors. Adding a new vehicle increases the potential for claims, regardless of coverage type. They might view having three cars as a higher risk, especially if they anticipate increased chance of accidents or damages.
Statistical Risk: Adding that extra car changes your overall risk profile. Insurers often base rates on statistical data, and they may have determined that households with multiple vehicles tend to have more claims, potentially leading to an increase in your premiums.
Discounts: Sometimes, insurance policies have multipolicy or multi-vehicle discounts, but there might be thresholds that affect the premium increase. If adding that third car means you no longer qualify for a discount, it can lead to a steeper premium hike.
General Rate Increases: The overall insurance market has been experiencing fluctuations, so premiums may be higher than expected due to broader trends affecting all drivers in your area or even nationwide.
Annual Premium Calculation: Insurance premiums can be based on annual projections, so adding even a small risk factor (like a third car) can lead to a larger proportional increase in your overall premium.
It’s definitely worth discussing with your insurance agent to see if there are any ways to mitigate the increase or explore if there are better options elsewhere. It’s always good to shop around or look into different policies to find what works best for you and your family.