Impact of Toyota Recalls on Auto Insurance Rates

Published: Tue 23 Feb 2010

Thomas Kristoffersen

With more than 8 million Toyota cars and trucks (including some Lexus vehicles) under recall for a variety of issues that include brake and accelerator problems, insurance claims are all but certain. But how will those claims, and the volume of them, affect your insurance rates?

Dating back to mid-January, Toyota recalled a variety of vehicles in its lineup for faulty brakes, faulty accelerators, floor mat issues and even driveshaft concerns. An estimated three-dozen deaths in auto accidents have been linked to the faulty problems. And while Toyota has a fix for the problems and has recalled the vehicles, it leaves consumers scratching their heads.

What you can do

If you have a recalled Toyota, first thing's first: Bring it into a dealership and have it serviced for the recall issue. But beyond that, know that you cannot lose your insurance coverage as a result of the recall. And, in theory, the sheer nature of the recall should not increase your auto insurance premiums, because the recall should curb accidents (and thus, claims).

According to insurance industry watchers and analysts, Toyota is the party with the bigger insurance issue. If insurance companies are dealing with a massive amount of claims related to faulty Toyota and Lexus vehicles, they will turn to Toyota to fix the situation, not their customers. To stay safe, remember to get your car serviced and repaired. If you fail to do this, and you are involved in a recall-related accident, you could be responsible for part of the accident because you ignored the recall issue.

Other issues of concern

So, after you've got your car fixed, what else should you worry about? Well, it's resale value, for one. A number of studies have shown decreased consumer confidence with the Toyota brand overall (a remarkable shift, as Toyota was historically one of the most well respected brands on the road), which means demand for Toyotas is going down. And that means your car is worth less than it was pre-recall.

In the long term, that's bad news. But in the short term, it could bode well for you because your insurance costs might go down. Think about it: The less your car is worth, the less coverage the insurance company is going to need to provide for replacement cost. And that means, in theory, that you shouldn't have to pay as much for your insurance.