Luxury car insurance covers vehicles that are high in cost and performance and made by a luxury manufacturer, such as BMW, Mercedes-Benz and Lexus. I recommend getting full coverage—liability, comprehensive, collision, personal injury protection or medical payment, and gap or new car replacement coverage. Read below to learn about luxury and exotic car insurance and the steps you can take to lower your premiums.
What Type of Coverage Do You Need for a Luxury Car?
I recommend that owners of luxury vehicles have the following coverages:
- Liability insurance
- Collision and comprehensive insurance
- Personal injury protection or medical payments insurance
- Gap or new car replacement insurance
The general rule for liability insurance is to buy enough to cover your at-risk assets; meaning you should cover the value of anything you stand to lose if you are held liable for damages. This insurance covers medical expenses and property damage to other parties in the event of a car accident, if you’re proven to be at fault.
Collision and Comprehensive Insurance
Full collision and comprehensive insurance, which both cover damage to your own car, are an essential — and expensive — part of insuring a luxury vehicle. Collision insurance covers damage to your vehicle in an accident that involves your car hitting another vehicle or structure. Comprehensive insurance covers damage to your vehicle caused outside of accidents. This includes damage caused by natural disasters, falling objects, and theft to name a few examples.
Having collision and comprehensive coverage ensures that you’re covered for the full cost of any repairs to your vehicle, regardless of fault. Premiums for this type of coverage are based on the value of your car and its repair costs.
Personal Injury Protection and Medical Payment Coverage
Personal Injury Protection (PIP) which covers you and your passengers’ medical bills in the event of an accident—is an important coverage for luxury car owners, given the heightened risk of injury from a car crash that comes with high-powered vehicles.
With PIP, your insurer will pay regardless of who is at fault, which means claims are typically processed faster and with less dispute. If PIP is not offered by your insurer, or isn’t available in your state, then consider medical payments coverage. Medical payment coverage functions like PIP but doesn’t pay out for lost wages or similar losses.
Gap and New Car Replacement Coverage
If you’re leasing or financing a luxury vehicle, you should purchase gap insurance, which covers you if you owe more on the vehicle than your insurance would pay to replace it in the event of an accident. Since your insurer would only pay the car’s actual cash value, you could be on the hook for thousands of dollars if your vehicle depreciates in value rapidly, which happens to many luxury vehicles once purchased and driven, if you don’t have gap insurance.
If you are purchasing a new luxury vehicle outright, consider new car replacement coverage. The cost of buying a replacement car—of the same make and model—if you total your vehicle is covered under this type of insurance. It’s usually only available if you purchase comprehensive and collision coverage.
How Much Does Luxury Car Insurance Cost?
It costs significantly more to insure a luxury car than a non-luxury car. But there are ways to take advantage of discounts.
High Risk Drivers
Avoid adding high-risk drivers—such as young drivers—to your plan, because they’ll cause dramatic increases to your premiums.
Another way to cut costs is to drop all coverage except comprehensive when you’re not planning on driving a vehicle for an extended period of time. Maintain comprehensive coverage in case any non-driving related damages to your vehicle occur. If you have a vehicle that you only drive in the summer—a convertible, for instance—check if your insurer will let you reduce your coverage while your car is in storage.
Don’t drop collision insurance if you plan to store your vehicle in an unsecured location with reduced coverage because you won’t be covered for hit-and-run incidents. You cannot reduce liability coverage for most leased vehicles because of minimum liability insurance requirements.
Luxury Vehicle Safety and Anti-Theft Discounts
Auto insurers usually give discounts for safety features such as anti-lock brakes, daytime running lights, airbags, and traction control systems. Many of these features are standard on luxury vehicles so make sure you receive all possible discounts from your insurer.
Insurers give discounts for things that reduce theft risk, like car alarms, secure parking, electronic tracking devices, and vehicle identification number (VIN) window etching. VIN window etching involves engraving the VIN onto the windshield and windows of your vehicle, and can be done at a dealership or auto body shop for around $100 to $200. It makes your car more easily recoverable by law enforcement agents and reduces its value to thieves who are looking to take apart your vehicle, as they have to discard parts that are traceable.
Exotic Car Insurance
A subsection of very rare and expensive luxury cars are considered to be exotic cars. Examples include Ferraris, Lamborghinis, and McLarens. These vehicles represent a massive risk for insurers due to their huge cost, expensive repairs, and the elevated crash risk that comes with very high horsepower. A unique aspect of such cars is that, unlike most vehicles, they may increase in value over time.
If you own an exotic car, consider a collector car or specialty auto insurance policy. These policies often operate on an agreed value for your vehicle, meaning that you and your insurer decide a total payout price to replace your vehicle. This agreed value is the maximum amount you’re covered for, which eliminates disputes if your insurer has a lower valuation of your exotic vehicle’s actual cash value than you would expect.