How Vehicle Recalls Affect Car Insurance

Recent news has reported GM needed to recall about 1.5 million trucks, crossovers and cars with the model years 2006-2009 due to windshield washer fluid heaters that could catch fire. This massive recall wasn’t the first we’ve seen this year. In January, Toyota announced that it would be recalling 2.3 million vehicles, a number that climbed to nearly eight million by February.

While car owners were busy trying to figure out how to safely operate their recalled vehicles until they were able to get them repaired, some began to wonder what could happen to their auto insurance in the meantime. Would they be charged more for insurance now that they own defective vehicles? This is a question that is still hanging in the balance.

Auto Insurance Pricing and Recalls

Before exploring how a recall affects an auto insurance policy, examine just how auto insurance is priced. According to the Insurance Information Institute, some or all of the following items could affect the price of a policy:

  • Driving history
  • Physical location
  • How many miles you drive
  • Cost of the car
  • Age and gender
  • Credit rating
  • Repair costs
  • Safety rating

The recall of a vehicle is not among the items listed above. This is because experts tend to believe that recalls don’t seriously affect auto insurance rates. In fact, not long after the Toyota vehicles were recalled, insurers from both State Farm and Allstate Corp. came forward to say not only would individuals with vehicles affected by the recall be covered if they were in an accident, but that the recall would not have an effect on policyholders’ auto insurance rates.

Could a Recall Affect Your Insurance In the Long Term?

While insurers were certain that a recall would not affect a person’s auto insurance rates right after the Toyota recall, there hasn’t been as much certainty whether or not it could influence rates in the long-term. As mentioned above, the safety rating of a car is a contributing factor in how insurance rates are determined, so if a car accumulates too many claims or has too many recalls, the possibility of seeing an increase in rates over time could heighten.

In the case of the most recent recalls this year — Toyota and GM — the likelihood of rates increasing merely because the vehicles were recalled are pretty slim. However, this doesn’t mean a recall should not affect your approach to purchasing a vehicle or even keeping an eye on your auto insurance rates.

Watching Recalls for Your Own Safety and Insurance Pricing

Before purchasing a vehicle, it’s a good idea to find out if the model has been recalled previously. This helps to ensure your safety while in the car, as in the instance of “sticky pedals” like those found on Toyotas, and protects you from the possibility of higher interest rates.

That’s not all. If you are not lucky enough to have purchased a vehicle from a manufacturer like Toyota that was willing to accept responsibility for any accidents, you could find yourself at fault for an accident and suffer a rate increase for damaging another person’s property. These are all good reasons to make sure you know the history of not only the specific vehicle you purchase, but the make and model as well.

Also, while rates have yet to increase across the board as a result of a recall, some car models are expected to see increases sometime this year. So take a look at the vehicles out there that seem to be connected to increasing rates. You may find that you could save on the overall cost of your car by purchasing your next vehicle based on the cost of insurance.