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.
Man working on finances with calculator

Why is car insurance so expensive? This is a question people ask themselves all the time. It feels as if premiums rise every year, even if your record is spotless. Insurers consider multiple factors when they calculate your rates. These 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 coverage. You can get discounts, lower your driving risks, or even move to a different area.

This article will break down everything that makes a policy expensive. We’ll tell you how to lower your premium so that you don’t pay too much. You’ll also get answers to some of the most common questions regarding auto insurance rates.

Why Your Car Insurance Is Expensive

Car insurance companies price premiums by looking at your personal details. This makes the cost for coverage unique to each customer, including you. This also means that when your insurer raises your rates, there can be many reasons behind the increase. Some of these factors are in your control, and others are not, such as inflationary pricing pressures.

Next, we take a look at both kinds of rate factors, those in your control and the ones that are not. These facts about you or your record are what insurance companies consider when deciding how much to charge you.

Reasons You Can’t Control

Some of the reasons for increasing rates 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 premium. If you’re under the age of 25, your insurance could be expensive just because you’re a young driver. There are ways to lower your costs if this is you, which will show up later in the article.

Your Gender and Marital Status

Gender is one of the factors that 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 are safer drivers than men. Women are generally more likely to pay less for their coverage than men because of this. Expect to pay a little more if you’re a male.

Marital status is also something that can move the dial on the cost of your policy. 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.

On the flip side, your rates could go up after divorce. First, you no longer have the advantages of marriage in regard to claims. But second, if your driving record is worse than your ex, your premium is probably going to rise.

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 policy costs so much. Here are the factors driving rates that you can control:

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 blemish on your record, that’s probably the reason for your high rates.

At-fault accidents will cause providers to raise your premium 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 result in higher prices 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 will also make an insurance provider charge you more for coverage. 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 making your rates 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 premium.

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 and where you park your car can have a big impact on your insurance prices. Insurers charge customers who live in riskier areas more than those who don’t. Here are a few examples of risky areas:

  • Cities with many collisions
  • Areas with high theft or vandalism
  • 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, wildfires, etc.

In general, people who live in cities pay more for coverage 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 high premium. Insurers charge more to cover cars that aren’t as safe and that are more expensive. This is because they’re costlier 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 premium. 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 Insurance Costs

It’s not a hopeless situation if your insurance costs too much. There are ways that you can lower your premium. 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 pay less for coverage:

  • Get discounts. Getting discounts is a great way to lower your rates. Every insurer offers ones that you can qualify for. Popular rewards include the good student discount and safe driver discount. 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.
  • Fight tickets in court. Consider fighting traffic tickets or moving violations in court to keep them off your history, especially if you have a few points on your driving record. Sometimes the license points from one more ticket could cross a threshold that puts you in a high-risk insurance category.
  • 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 premium. 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.
  • Get a different car. Newer and expensive vehicles cost more to insure. So, in order to lower your monthly auto insurance bill, one option is to drive a car worth less money. You could either buy a less expensive model or you could get a nicer used car.

Frequently Asked Questions

Why is car insurance so expensive for young drivers?

Insurers charge young or teenage drivers more for auto insurance than they do for those over the age of 25. The reason is that young drivers tend to get into more accidents than experienced ones. Unfortunately, this is one of those rate factors you have no control over.

You can lower your rates by getting discounts, such as the one for good students. Another way is to ensure you or your child drives a car with safety features or isn’t too expensive. Doing so will lower your premiums and help counter the price of being young.

Why is car insurance so expensive for new drivers?

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, nearly 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 a policy for the first time. That puts many discounts like continuous coverage and safe driver temporarily out of reach. Your rates will improve over time as auto discounts become available as you gain experience behind the wheel.

Until then, we recommend shopping around because each insurer handles new drivers in its own way. Some will have better rates than others. We ranked the best car insurance companies for new drivers to give you a head start in your search for the right deal.

Why is it so expensive to insure a new car?

New cars are expensive to insure because of their value. The more a car costs to replace, the more it costs to insure. Financing a car will also drive your rates even higher. Banks and other lenders require full coverage including liability, collision, comprehensive, and gap insurance to protect their investment. Once you’ve paid off your loan you can remove any coverages you desire.

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

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’ll be able to help you figure out why your rates are too high. This will give you clarity and allow you to start taking action to lower your premium.

Why is one car more expensive to insure than another?

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 company thinks the cheaper car is safer.

Why is driving expensive?

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. Then, you have taxes and registration to consider. Car tab increases are an unpopular, but common, way state governments raise revenue. There are also maintenance, repair costs, and parking fees. Not to mention the cost of gas. Once we arrive at car insurance, it’s already expensive to drive a car. This is why it’s so important to compare quotes to ensure you’re getting the best car insurance deal.

Share:

Related Articles:

Man giving thumbs up out car window

How Much Car Insurance Do I Need?

Car insurance is always a good idea to have. Most states require it. But how much do you need? Read more to learn how much coverage you should buy.