As a luxury car owner, you enjoy a lot of benefits. A luxury car, such as a Porsche or Mercedes-Benz, often has the latest technologies, advanced safety equipment, and unparalleled engineering. But how do you go about insuring that luxury car?
Your search ends here when you get rates for FREE by entering your ZIP in our box!
Luxury car insurance is basically no different than car insurance for any other vehicle. However, you do need to make sure it will cover everything you need it to. The good news is that there are even ways to save money while doing so!
Higher Liability Limits
While the basics of a car insurance policy on a luxury car are no different, the reality is that you will be perceived differently than other car owners. Driving a luxury car indicates a certain amount of status and financial success. While this is certainly not a bad thing, it is something to keep in mind.
Liability insurance pays for the costs that the other driver incurs when you cause an accident. Not only will it pay to repair the other driver’s car, but it will pay for his medical bills, any wages he loses while recovering from the accident, and the pain and suffering settlement. It will also cover your legal costs if he were to sue you in court.
Because you drive a luxury vehicle, the chances of being sued are higher than they would be if you drove another type of vehicle, simply because you appear to have money.
If you carry low amounts of liability, you could be in a lot of financial trouble.
While each state sets its own lower limits for liability requirements, they all have one thing on common: they are fairly low amounts. Some states, like California, only require $5,000 in property damage liability. While this would cover the damages from minor fender-benders, it would hardly pay to replace most vehicles on the road.
The requirements for bodily injury are also low. For instance, California only requires $15,000 in coverage per person, with a maximum of $30,000 for the accident. As you can imagine, this would hardly go very far in a serious accident that sends a couple of people to the hospital. Anything that the insurance doesn’t cover you’ll have to pay for out of your own funds.
If you don’t have adequate insurance to cover the costs of an accident, it’s highly likely you’ll be dragged into court so that the other driver can recover the costs. This is even more likely if you are driving a car that tells the world you have money.
This is why financial advisors and those in the insurance industry, like the Rocky Mountain Insurance Information Association, suggest carrying much higher liability limits, like 100/300/50 or higher. This would provide $100,000 person and up to $300,000 per accident just for bodily injury. However, if you have a significant amount of financial assets, you may need even higher limits.
Umbrella Policy
Even liability levels this high might not be enough protection. You might need to look into an umbrella liability policy. This type of policy provides additional liability coverage, usually in $1 million increments, that goes into effect after your auto or homeowner’s liability is exhausted.
In fact, Kiplinger Magazine suggests that almost everyone needs an umbrella policy.
It is fairly inexpensive – usually only a couple hundred dollars for the first million dollars’ worth of coverage. Not only does it cover your current assets, but it could protect your future wages, as these could be garnered to pay a lawsuit.
If you aren’t sure whether you need an umbrella policy, Kiplinger gives this guideline: If you make over $100,000 a year or have over $1 million in assets – this could be retirement accounts, homes, or other property – you probably need one.
One more tip: You often need to purchase your auto and home insurance from the same company in order to buy an umbrella policy.
Gap Insurance
Another type of insurance to consider is gap insurance. This is a very helpful type of insurance that could protect you from paying for your luxury car in case of an accident that totals the car.
If you have bought a brand-new luxury car with either no down payment or a low down payment of less than 20% or 30%, you should probably look into gap insurance.
It pays the gap between what your collision or comprehensive coverage will pay, which is only the current market value according to the Insurance Commissioner for the state of Washington, and the loan balance on the car.
For example, if you buy a $50,000 luxury vehicle with only $5,000 down, you have a $45,000 car loan balance. Everyone knows that brand-new cars depreciate quickly in the first few months of ownership, often as much as 30%. So, in six months, your brand-new car may only be worth $35,000.
If you were to be in an accident that was your fault at that time, and it totaled the car, your auto insurance would only pay you $35,000 towards replacing it, minus your deductible.
However, it’s highly unlikely that you will have paid the car loan down that far in only six months. You will be responsible for paying for the difference even with no car to show for it.
That’s where gap insurance comes in. It will pay the remaining amount of the car loan so that you can start fresh. You won’t need it for the lifetime of the loan, just until your loan balance is equal to or less than the actual market value of the car. If you buy a used vehicle, you probably won’t need gap insurance at all.
Comp and Collision
If you have a car loan on a luxury vehicle, whether you bought it used or new, you will be required to carry comp and collision coverage on the car until the loan is paid off. Once the loan is paid off, these become optional coverages. Collision pays for your car repairs if you cause a traffic accident. Comprehensive pays for them if the damage occurs in something besides an accident, like hail damage or if the car is stolen.
On a luxury vehicle, you probably want to keep collision and comprehensive even if the car is paid for.
Luxury vehicles are more expensive to repair, as they often have specialized parts. And they are definitely more expensive to replace, since they cost more to begin with.
Unless you can easily afford to buy another identical vehicle outright, or pay for thousands in repairs out of pocket, you are better off keeping the policies. A better way to save money on them is to raise the deductible. Since the deductible is the part of the repair price that you agree to pay, if you raise it the premium for your insurance will go down, often significantly.
Alternative Insurance Options
Depending on your personal circumstances, you might be able to use some alternative insurance options for your luxury vehicle.
If you rarely drive the vehicle, you might look into the new pay-as-you-go car insurance. This would probably not be a good option if you use the car to commute daily, but if it is only a weekend car or rare-occasion car, it could be a good way to save money.
With pay-as-you-go-coverage, you can still set the high liability levels you need and still have comprehensive and collision, etc. The difference is that, instead of having a set payment every month or every six months that basically covers you for unlimited miles, the amount you pay is based on how many miles you drive each month.
Another non-traditional option might work if you have young drivers in the house. Conventional insurance advice is to insure all of your family vehicles on one policy, since you get discounts for having multiple cars on the policy. This is true, and works for most circumstances. However, if you have a teen driver in the house who is on your policy, it might be better to have the luxury car on its own policy.
This is because teen drivers cause insurance rates to skyrocket. It’s even worse if they drive a fast or expensive car, since they are far more likely to be in an accident than anyone else on the road. So if you have a teen who would be considered a secondary driver on your luxury car, get a quote for having the car on a separate policy to see if it is cheaper. Then don’t let him drive it.
Other Ways to Save on Luxury Car Insurance
Besides raising your deductible and keeping you teenaged driver away from your luxury car, there are other ways to save money on luxury car insurance.
First, consider joining a club for luxury car owners. Sometimes you can find one for your specific make of car, while others are for any luxury car. Often, club members get discounts from associated insurance companies just for being a member.
Also look for any other discounts. Be sure the insurance company credits you for all of the safety features and any theft-deterrent features with which your car is equipped. Look over your credit history to make sure it is accurate.
A lower credit score can raise your insurance premiums. Consider taking a driver’s safety course for an additional discount.
Also keep in mind that no two car insurance companies charge the same amount. So shopping around and getting competing quotes for your insurance premium is a great way to find the coverage you need for a luxury vehicle while paying the least.
Start comparing right now for FREE just by putting your ZIP in our box below!