The antidote for the midlife crisis often comes in the form of a spiffy new sports car. In fact, the average age of a Porsche 911 buyer in the United States is 52 years, according to the International Councils of Societies for Industrial Design. But although that new set of wheels might make you feel young again, the insurance costs that come with swapping the family minivan for a little red Corvette or Porsche may not be worth it.
High risk equals high premiums
While good handling and high performance may be advantageous on the race track, insurance companies simply see a sports car as too much horsepower for everyday use, says Ryan Hanley, an insurance agent with Murray Group Insurance Services in Albany, N.Y. The temptation to show off a car's features raises the chance of an accident -- and raises your insurance premiums as well.
In general, a driver may pay anywhere from 10 percent more to nearly double for insurance. The specific amount varies, depending on the carrier, the driver's record and many other factors.
Sometimes, trading in one sports car for an upgraded model bumps up rates as well. For example, a client of Hanley recently traded in his Corvette for a Viper. His carrier promptly cancelled his coverage.
"The insurer knew he'd be commuting to work all summer in his Viper and denied him coverage," Hanley says.
Drivers who are denied coverage may be forced to seek it through substandard insurance carriers -- carriers that cover high-risk drivers at higher-than-normal rates.
Fitting the profile
If you're a safe driver, it may seem unfair to be charged more (or denied coverage) because you decided to reward yourself with a flashy new set of wheels. But in addition to considering how safe you are, insurers look at the safety record of those who generally buy your dream car-- and people who buy sports cars may not be as concerned with safety as those opting for family vehicles.
In fact, the Insurance Institute for Highway Safety (IIHS) does not test expensive exotic cars or sports cars, spokesman Russ Rader says. Although all vehicles must meet certain safety standards, niche sports cars do not have to undergo crash tests.
The car you're eyeing also may have a history that makes insurers nervous. Twenty to 30 years ago, Corvettes -- now a stereotypical midlife-crisis vehicle -- were the car of choice for 16- to 18-year-old males, says David Miller, CEO of Brightway Insurance in Florida. And these young and reckless drivers left the car with a reputation.
"With much higher losses, insurance rates for Corvettes skyrocketed," Miller says.
As a result, those who can afford to drive the car today are usually middle-aged men, Miller says.
Other factors to consider
Although the make and model of your car might mean a significant premium hike, a variety of factors could raise -- or even lower -- your premium. Your age and driving record play a significant role. And your insurer likely will adjust your premium based on how many family members (especially males under 25) will have access to your car.
Moreover, sports cars tend to be expensive and be targets for thieves. So, if you have optional types of insurance (like collision or comprehensive coverage), your insurer will have to pay more to replace your car if it's stolen or destroyed -- and that means higher premiums.
Cars are assigned insurance codes that help determine what you pay, says Kevin Lynch, assistant professor of insurance at the American College in Bryn Mawr, Pa. Auto insurance codes typically range from 1 to 27. Higher codes result in higher insurance rates. For example, a Corvette's code will be higher than that of a Prius, according to Lynch.
Factors that help determine car insurance codes include:
- The likelihood your vehicle will be stolen. Customized locks and alarms help lower your code number.
- The risk your car will be vandalized. Where you live and work play a factor in this number.
- The overall value of the car.
- Your vehicle's durability. A car that can withstand a hailstorm or snowstorm will likely receive a lower (better) rating.
- Engine size. A more powerful engine raises your rates.
- Style of the car (four-door sedan or two-door coupe or convertible). Drivers of two-door cars have substantially higher incidents of high-risk driving behavior, according to the National Highway Traffic Safety Administration.
Tips for keeping rates low
How much your rate will increase differs by company, Lynch says.
"Ask your agent to calculate the rates before you buy so you know what you're up against," He says.
For insurance purposes, exotic sports cars should be used only for occasional joy-riding, Hanley says. Keep a less-risky car around for your daily commute.
In addition, consider leasing a sports car instead of buying it, Lynch says.
"Drive it, enjoy it and then get over it," he says. "In 24 to 36 months, you turn it back in and will still have half the cost of your car in your investment account."