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UPDATED: Jul 16, 2017
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If you are a car enthusiast who has a passion for exotic pieces of machinery, you may be on a mission to buy yourself your favorite supercar.
Supercars, which may also be known as exotic vehicles are more than just a standard private passenger vehicle.
These high-performance and high-design vehicles tend to be rare and are not designed to be driven for your daily commute or your long-distance road trip.
To insure a vehicle that is classified as so rare and so expensive, you will most definitely need more than just a personal auto insurance policy.
Rate Calculation: Traditional Insurance vs. Supercar Insurance
Standard personal car insurance is designed to protect the owners of standard private passenger vehicles that can range in size and value.
Standard models of compact cars, trucks, vans and full-size cars will all qualify for standard insurance because they hold a reasonable value and the company can use fair market data and trends to evaluate the car when a claim is filed.
Since supercars are rare and not seen every day in any given region, most companies in the standard market will not cover them as a covered auto. Instead, you must purchase a specialty plan that is designed to cover a unique yet high-risk vehicle.
To truly understand why the rates are significantly different when you are shopping in the traditional market and the specialty private market, you need to learn how underwriting and rate determination processes differ between the two markets.
Every company, no matter what type of market or demographic that they target, will take the time to assess risk and to determine how much they need to collect from a driver to increase their chances of profiting.
Since there is no real way to tell if the company will have to pay for filed claims throughout a term, the only thing that the company is able to do is review an application, review demographic factors, look for red flags, use claims information, compare data and assign rates based on what is found.
How rates for a specialty supercar plan and a traditional plan are calculated vary dramatically. This variance plays a major role in why the rates can be much higher when insuring an exotic car.
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Rate Determination for Traditional Insurance
When a car insurance company is determining rates for a standard car, they reference an industry-wide and specific set of rating factors that will help them determine how much risk is present and ultimately how much the applicant should pay for 6 or 12 months.
While some companies have their own special brand discounts, most of the information and data referenced when determining rates and filing rates will be the same.
The most common rating factors used by standard insurers include the following:
- Driving record
- Accident history
- Driving experience and habits
- Vehicle usage and mileage
- Vehicle type and classification
- Gender, age, marital status
- Zip code where vehicle is stored
Vehicle type does play a role in how much insurance will cost, but not as big of a role as it will play when you are buying supercar insurance. Standard companies only use a car’s average cost of repairs and claims history to help give the vehicle a class.
The insurer may also use claims data to determine if a model is known to cause injuries or significant damage to third-party passengers and property.
The value of the car really is not a determinant that will affect pricing if you own a car that can be covered under traditional policies.
Rate Determination for Supercar Specialty Insurance
Rate determination for a supercar is a bit more involved. All of the factors that are used during the determination of rates for a traditional car will extend to a specialty plan as well.
The main difference will be in how risk is assessed for the vehicle. Since the car is rare, there will not be a long list of claims or data from repair shops that the company can use to decide what is appropriate.
This is why private specialty insurers will consider different aspects to set a premium for an exotic car.
Some of the factors that private insurers use during underwriting include:
- Original purchase price
- Current appraised value
- Add-ons or modifications
- Age of the vehicle
- Parts used in the engine
- Maintenance history
- Condition of the interior
- Repair history or parts used in repairs
- How often the vehicle is driven
- If vehicle is stored in a locked garage
Why Rates Are Higher for Most Specialty Plans on Exotic Cars
You might assume that people who can afford to buy a high-priced supercar will expect the premiums will be exorbitant, but when you learn just how much higher you might be shocked.
After all, even though a supercar can hold a six-figure price tag, there are standard cars that cost well over $60,000 as well and that are driven daily.
Unfortunately, to afford what it takes to maintain and insure a supercar, you will need to be astronomically wealthy.
The reason why supercar rates are so high is because of the value of these cars and how often they are targeted and how much the insurer is obligated to pay.
Unlike a traditional policy, where the insurer can calculate the fair market value of a car and then make an offer, private insurers must pay a 100 percent agreed upon value for a supercar claim.
The agreed value provision means that the owner of the car can set the value and the insurer is on the line to cover this regardless of the car’s age. The cost of insurance can vary from car to car and from agent to agent.
Since there is no depreciation and one claim could cost the insurer millions, the insurer must collect adequate premiums to justify the risk being taken.
If you are willing to spend six-figures on a supercar, you need to be willing to spend thousands of dollars every year on your insurance.
You should comparison shop and try to find the best deal with a company that knows this market in and out. Use an online comparison tool that connects you to supercar insurers, and browse through instant quotes.