Why Is Car Insurance So Expensive?

Is your car insurance too expensive? There could be many reasons why it costs so much. Here's why your rates could be high and what you can do about it.
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Does car insurance cost too much? Most people think so. It feels as if premiums rise every year. And they do for nearly everyone. But what makes car insurance so expensive? Insurance companies consider multiple factors when they calculate your rates. These factors include things that you can control like your driving record or credit rating. But they could also be things that have nothing to do with your record, like your age or gender.

Either way, there are plenty of factors that can tip your car insurance costs to the expensive side. However, there are ways to ensure that you don’t pay too much for your insurance. You can get discounts, lower your driving risks, or even move to a different area.

This article will break down all the things that could be causing your auto insurance to be so expensive. We’ll tell you how to lower your insurance rates so that you don’t keep paying too much. You’ll also get answers to some of the most common questions about expensive insurance rates.

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Why Your Car Insurance is Expensive

Car insurance rates aren’t the same for everyone. They’re unique to each customer, including you. Rates could go up for several reasons. Sometimes, they’re in your control and other times, they’re not. Rates can even rise with inflation. They’re subject to change at any time for a variety of reasons.

There are many reasons why your insurance is expensive. They come down to different rate factors. Rate factors are facts about you or your record that insurance companies consider when deciding how much to charge you.

Reasons You Can’t Control

Some of the things that can cause your rates to increase are beyond your control. It’s unfortunate, but insurance companies use general facts about you like your age and gender to decide prices. This is because some statistics show that certain groups of people, such as single males, drive less safely than others. Below are possible reasons why your insurance is expensive that aren’t under your control:

Your Age

One of the common factors that can affect your insurance is your age. How old you are can lower or raise your rates. According to the Insurance Information Institute (III), drivers who are above the age of 25 typically get in fewer accidents. This means that older or middle-aged drivers tend to have lower insurance rates. If you’re under the age of 25, your insurance could be expensive just because you’re young. There are ways to lower your costs if this is you, which will show up later in the article.

Your Gender and Marital Status

Your gender is one of the factors that insurance companies look at when determining how much you pay. The III also notes that women tend to have fewer accidents and DUIs than men. These statistics cause insurers to believe women to be safer drivers than men. Women are generally more likely to pay less for their coverage than men are because of this. Expect to pay a little more for your insurance if you’re a male.

Marital status is also something that can cause your rates to move up or down. Being married can cause your rates to go down. Meanwhile, single people will likely pay more if everything else is equal. Technically, this is something you can control because you can always get married at some point. But it isn’t a change you might be in a position to make right away, which makes it fall under this category.

Reasons You Can Control

Your insurance might also be expensive due to actions in your control. Factors like your driving record and credit rating are no-brainers, but they’re very important. These types of factors are ones you should consider if you’re trying to figure out why your insurance costs too much. Here are the main controllable causes for your insurance prices being high:

Your Driving Record

This is probably the most obvious reason why your insurance is expensive. Having tickets and accidents on your record can drive your prices through the roof if you’re not careful. If you have a ticket or accident on your record, that’s probably the reason why your car insurance is expensive.

At-fault accidents will cause insurance companies to raise your rates by a certain percentage. This is especially when the expenses from the accident exceed your coverage limits. The amount that your rates go up depends on your provider.

Be aware that some incidents cause your rates to rise higher than others. Getting a DUI or a reckless driving ticket will cause your rates to skyrocket. This is a scenario where you’d likely notice the price difference right away.

Not having any driving record at all can also cause your rates to be higher. This is because you’re an unknown to insurers, which makes you riskier. Having no track record and being young are two things that usually go together in causing your insurance rates to be more expensive.

Your Credit Rating Is Bad

Having a poor credit rating or FICO score can cause insurers to charge you more than normal. You present a higher risk for companies if you have a bad credit rating because you don’t look reliable. Providers can reflect this in your car insurance rates.

However, not all states allow insurance carriers to use credit ratings to determine your premiums. Below are the states that don’t let companies use your credit as a rate factor:

Where You Live

Your area of residence can have a big impact on your insurance prices. Auto insurance companies charge customers who live in riskier areas more than those who don’t. Here are a few examples of risky areas:

  • Cities with high collision rates
  • Areas with a high theft or vandalism rate
  • Rural areas where you could easily hit a deer or other animal
  • Regions that are prone to natural disasters, such as tornadoes, hurricanes, floods, hailstorms, etc.

In general, people who live in cities pay more for their insurance than people in rural areas. This rate factor is something to keep in mind if your insurance costs too much. It could be worth it to move somewhere else where your coverage is cheaper. You might want to consult your agent before moving elsewhere to see if you could save money. 

Your Car and How Much You Drive It

The type of car you drive can be a reason for your premiums being high. Insurers charge more to cover cars that aren’t as safe and that are more expensive. This is because they’re more expensive to replace or repair. It’s also because a less safe car can put you at higher risk for injury in an accident.

The number of miles you put on your car each year can also raise your rates. Driving more miles means there’s a higher chance of you getting into an accident. Insurers consider this and raise your rates accordingly.

How to Lower Your Costs

It’s not a hopeless situation if your insurance costs too much. There are ways that you can lower your costs. You can’t do anything about your age or gender, but you can still control some factors. Here are some of the best ways to lower your insurance costs:

  • Get discounts. Getting discounts is a great way to lower your rates. Every insurer offers discounts that you can qualify for. Popular discounts include the good student discount and safe driver. Be sure to check with your agent or provider to see what they have available in the way of discounts.
  • Drive safer and avoid tickets. This one is obvious but important. Avoiding tickets and accidents means your rates can go down. Going a couple of years without any issues will likely result in lower costs.
  • Change your provider. Some auto insurance companies might just be more expensive than others. It’s a smart practice to shop around and compare rates to make sure you’re getting the best deal you can.
  • Lower your limits. You might be paying more for car insurance because your limits are too high. Lowering your limits means you’ll pay less. This is a good option because it guarantees you’ll save some money.
  • Raise your deductible. Raising your deductible will lower your insurance premiums. This is only a good option if you don’t get into frequent accidents. Don’t do this if you can’t pay the deductible if you get into an accident.

Frequently Asked Questions

Q: Why is car insurance so expensive for young drivers?

A:  Insurers charge more for young or teenage drivers than they do for those over the age of 25. This is because young drivers tend to get into more accidents than experienced ones. Unfortunately, this is one of those rate factors you don’t have any control over.

You can lower you or your teen’s rates by getting discounts such as the one for good students. Another way is to make sure you or your child drives a car that is safe or not too expensive. Doing either of these will lower your premiums and help counter the price of being young.

Q: Why is car insurance so expensive for new drivers?

A: New drivers pay more for their auto insurance coverage for several reasons. It’s important to note that a new driver isn’t necessarily a teen. You can become a new driver at any age. Even so, almost everything that applies to teen drivers also applies to new drivers. The lack of experience is a big deal to insurers. Most new drivers are also purchasing insurance for the first time. This will put many discounts like continuous coverage and safe driver temporarily out of reach. Rates will improve over time as discounts become available as your gain experience behind the wheel.

Q: Why is it so expensive to insure a new car?

A: New cars are expensive to insure because of their value. The more a car costs to replace, the more it costs to insure. Speaking of replacement, financing a car is going to add even more to your insurance costs. Banks and other lenders require collision, comprehensive, and GAP coverage to protect their investment. Once you’ve paid off your loan you can remove any coverages you desire.

Q: How can I find out why my car insurance is so high?

A: There are a lot of reasons why your insurance might be high. You should consider the following rate factors:

  • Age
  • Gender
  • Driving record
  • Credit rating
  • Where you live
  • Type of car you drive and how much mileage you put on it

It might also be a good idea to talk to your agent. They might have an idea of why your rates are so high. This will give you clarity and allow you to figure out how to lower your rates.

Q: Why is one car more expensive to insure than another?

A: One car on your policy might be more expensive than another for a couple of reasons. The first is because it’s worth more than the cheaper one. More expensive cars cost more to replace after an accident. The other reason is that your insurance company thinks the cheaper car is safer.

Q: Why is driving expensive?

A: Driving is expensive for many reasons. First, cars are not cheap. Some are more expensive than others, but a decent vehicle is going to dent your pocketbook. Often for a long time because of financing. Then, you have taxes and registration to consider. Car tab increases are an unpopular but common way state governments raise revenue. There’s also maintenance, repair costs, and parking. Do we even need to talk about gas prices? Once we arrive at car insurance, it’s already expensive to drive a car. It’s no wonder people compare quotes and switch companies so much!

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