Do you own a luxury car or want to own one? Well, many people dream of owning one.
When you buy a luxury car, you do not just have an A-to-B transportation method. A luxury car it’s an exquisite, finely tuned driving machine. It’s built to make you enjoy your ride with everything you may need in a car – with style, speed, warmth, sound, and comfort.
As such, your luxury car is worth protecting to the fullest using Luxury care insurance.
Let’s explore the Luxury Car Insurance so that you can know the insurance options that are worth considering for your high-performance car.
What Is Luxury Car Insurance?
Luxury car insurance is a uniquely special type of insurance. It is an insurance cover for high cost, high-performance cars often manufactured by luxury brands —such as:
Because luxury cars are expensive, any damage they incur can result in massive repair bills. This is where luxury car insurance comes into the picture. However, luxury car insurance is usually more expensive than standard car insurance.
How Does Luxury Car Insurance Differ From Standard Car Insurance?
Insurance companies use various factors to determine the price of a car insurance policy. Some of the factors insurers consider when calculating the premium cost include:
- Age of the car
- The driver’s age, gender, and marital status
- Type and cost of the car
- Cost (value) of the car
- Driving history or record
- Credit score
- Insured Declared Value
When insuring luxury cars, insurers have a keen eye on the Insured Declared Value (or IDV). Put simply, IDV is the car’s market price. However, do not mistake or confuse IDV with the car’s resale value. Generally, IDV is the upper limit of the amount an insurance company is willing to give the policyholder in the event of a total loss, such as theft and damage beyond repair.
Insurers will always use the IDV value to determine the cost of insurance. Since luxury cars’ cost is typically more than standard cars, their IDVs are also higher. The cost of repair or total replacement of luxury cars is very high. Luxury cars are also targets for theft and vandalism. The higher amount of luxury cars’ IDV means that their insurance premium is also higher than standard cars.
How Much Does Luxury Car Insurance Cost?
The precise price of insurance policy for your luxury car is dependent on many factors. However, the primary factors that determine the price are:
- Age or the Car
- Claim history of Luxury cars
These factors are directly related to your car and the insurance and can make insurance costs stay steady or go up. Otherwise, the cost of luxury car insurance is much higher than the standard cost of a car insurance policy.
Value Determination In Luxury Car Insurance
Before you buy a luxury car insurance, you need to know about Value Determination in cars. This applies to all auto insurance but is more important in luxury car insurance. Value determination dictates how much your carrier will reimburse you for the totaled and/or the damage cost of your car.
When purchasing an insurance plan, you should understand three terms:
- Agreed value: The price agreed upon by both the plan holder and the provider concerning the car’s reimbursement cost in case of a theft incident, major damage, or total loss.
- Actual cash value: The total amount of money the provider owes you from theft, damage, or total loss. Usually, this is the current market value of your car, less the car’s depreciation cost.
- Replacement cost: It is a similar cost to the agreed value except that it must have been owned for not more than three years. The insurer will reimburse the car in case of theft, major damage, or total loss without factoring in depreciation cost.
When you purchase luxury car insurance, it is essential to inquire if the provider applies the policy’s replacement cost or the agreed value. This is important to ensure that you do not run into problems with your provider in case of theft, major damage, or total loss of your luxury car.
What Is Included In Luxury Car Insurance?
First of all, luxury cars are cars like other vehicles on the road. This means they have to conform to the state laws and regulations that govern vehicle insurance in every state. The normal car insurance policies that even luxury cars should have include:
- Liability insurance
- Personal injury protection (PIP)
- Collision insurance
- Comprehensive insurance
- Uninsured and Underinsured Motorist insurance
Note: The premiums’ prices will be a little higher for luxury cars than the standard insurance policy.
Some states demand that cars have minimum car insurance, such as liability insurance or PIP. In addition to these ordinary insurance coverages, luxury cars need two important add-on coverages
- Gap insurance
- New car replacement insurance
If you’re financing or leasing your luxury car, gap insurance should be your best fit. It will cover you in case of a total car loss when you need to replace the vehicle. Gap insurance covers the difference between the car’s current worth, the actual cash value, and what your standard insurance will pay, and the actual amount you owe. This should help you replace the vehicle.
On the other hand, if you’re outrightly purchasing a new luxury car, you may consider purchasing a new car replacement insurance. New car replacement coverage covers the cost of buying a replacement car of the same model and make. In most cases, new car replacement insurance is usually only available if you purchase collision and comprehensive coverage.
Since your luxury car might come with some extra features, you should choose a policy that gives your car complete coverage. Here are a few car insurance considerations that are specific to luxury cars:
- OEM parts: When you have Original Equipment Manufacturer (OEM) insurance, your carrier will pay for your car repair using original equipment manufacturer parts, instead of the cheap aftermarket parts. Luxury vehicles have expensive spare parts, and paying for OEM insurance can be essential.
- Storage and limited use coverage: If you won’t be driving your car every day, the storage and limited use insurance covers your car only when you’re driving, or it is a pay as you drive insurance. The insurer won’t charge you premiums for the storage periods when you know you’re not using your car.
- Custom parts and equipment: This is almost similar to OEM, but applies to the car’s customized parts, devices, equipment, and accessories. These are items that don’t come cheap, and ensuring them is the right thing to do. Custom coverage varies among luxury car insurance providers, but the typical features include:
- Navigation systems
- Wi-Fi access
- Television equipment
- Special insulation or carpeting
Apart from these factors mentioned here, the cost of luxury care insurance will also depend upon the type of policy you choose and your insurance carrier.
Owning a luxury car is everyone’s dream, but they have higher insurance costs because of their value. However, you need to shop around and get the best value for your car. You also need to take advantage of add-ons, discounts, and other factors that can help you reduce the cost.