Personal Finance Expert
Tyron Jones is a finance expert who has operated within the auto insurance business for more than 10 years. He has written many other finance related articles for a number of prominent publications.
If you own a car, you know one of your most costly expenses is your auto insurance policy. Insuring your vehicle can be a nightmare, but it's necessary if you want to gain legal access to roads. While protecting yourself from the ballooning costs of an accident is essential, it's also important to protect your budget as much as possible.
With so many policy options to choose from, it's easier than ever to find an auto insurance policy that's more suitable to your budget. If you're currently paying a lot for your insurance, you might be wondering about the reasons behind your premiums. In this article, we'll take a closer look at factors that are increasing your insurance premiums, as well as methods you can use to reduce your insurance costs.
While some of the factors mentioned on this list only play a minor role in increasing your insurance costs, these extra costs can add up significantly over time. It's always a good idea to lower the burden of your insurance costs when possible.
What Factors Can Impact Your Insurance Premiums
When an insurance provider gives you a quote on a policy, they consider a variety of different contributing factors to determine a price. While a single one of these issues might not play a major role in the cost of your policy, when combined, they can have a significant impact.
Let's explore some of the core factors that determine your insurance policy rates:
1. Your Driving History (Driving Record)
Your driving history is one of the most critical determinants of your insurance costs. Insurance companies will use your driving record to determine how much they can trust you to avoid costly accidents and other issues. Insurance companies want to expose themselves to drivers that don't offer much risk.
2. Your Policy Coverage
Another determinant of your insurance costs is the amount of coverage that you have. If there are more items covered by your insurance policy, this means that your insurance company will end up having to pay out more money if something happens. If your policy covers everything, it can get expensive.
3. Your Deductible
Your deductible is the amount of money that you will have to contribute towards any claim. For example, if your deducible is $200, and you get in an accident that costs $500, your insurance company will only pay the $300 difference between your deductible and the cost of your claim. The lower your deductible, the more your insurance company will have to cover the cost of the claim.
4. Your Credit Score
Your credit score is a major contributor to your insurance premium costs. While this isn't the case at all insurance companies, it's certainly something to consider. Many insurance companies will use your credit score to determine how responsible you are.
5. Your Neighborhood
The neighborhood you live in can have an impact on your insurance rates. By checking crime rates in your neighborhood, insurance companies can determine the risk of theft and other issues. In doing so, they can help reduce their exposure to neighborhoods that may have frequent vandalism and auto theft.
6. Your Personal Details (Age, Marital Status, Etc.)
You may not realize it, but your age, marital status, and other personal details have a major impact on your insurance policy rates. This is why an insurance company will ask for these details when you fill out a quote form.
7. Your Car
Some cars cost more money to insure. This can be due to a car being prone to theft, expensive repair, or a variety of other issues. Your car insurance company will always ask for in-depth details about a vehicle before they offer you an insurance quote.
There are various incentives that can contribute to the cost of an insurance policy. For example, you might find that some insurance companies offer ‘no-claims' bonuses, which can reduce the cost of insurance policies for those who don't report to be in any accidents throughout the year. There are hundreds of different incentives available across the market.
9. Your Insurance Provider
At the end of the day, your insurance company has a major role in how much you pay for your insurance policy. Different insurance providers have different pricing models that will determine the cost of a policy. Just because an insurance company is cheap for your friend or family member, doesn't mean it's cheap for you.
So, Why is My Insurance So Expensive?
Now that you understand more about the various components that determine the cost of your insurance, you might find yourself wondering: Why is mine so much? Let's take a look at some of the most common reasons that people have expensive insurance.
You Don't Have a Good Driving Record
If you don't have a good driving record, this can be one of the major reasons that your car insurance is so expensive. In essence, your driving record determines the risk that you pose to the insurance company. If you've made many insurance claims in the past, there's a good chance that you'll make more in the future.
The same goes for an abundance of speeding tickets and other infractions. The more speeding tickets you have, the more likely you are to be a reckless driver. Many insurance companies will charge extra to drivers they believe drive recklessly.
Your Deductible is Too Low
As your deductible directly relates to how much money your insurance company must pay out, it can have a severe impact on your rates. While having a low deductible seems like a good idea, it gives your insurance company an excuse to charge you much more than would be the case with a high deductible.
If you're someone who currently has a low deductible, this can be one of the primary reasons that your policy is so expensive.
You Have Too Much Coverage
If you purchased your insurance policy without giving it much thought, there's a good chance that you currently have too much coverage. Insurance companies love to add on extra benefits and coverage options. This might sound good at face value, but ‘there's no such thing as a free lunch.'
You'll be paying for these added benefits on your policy. For example, if you want extra coverage for your windshields, this will likely cost you. If your policy is costing you too much, it might be because your coverage levels are too high.
Your Car is Expensive to Insure
If you have a car that's expensive to insure, this can be a major problem if you're trying to reduce your insurance costs. The reality is that certain cars are much more expensive for insurance companies to cover. For example, if you have a large vehicle, you're likely to pay more to cover it.
Finding out which cars are more expensive to insure can be difficult. The best way to find out is to directly as your insurance company if your car is increasing your insurance costs.
How to Stop Overpaying for Your Car Insurance
If you suspect your insurance policy to be significantly more than it needs to be, you're probably right. If you're not a car insurance expert, there's a good chance you're overpaying for your car insurance. Fortunately, there are a variety of things you can do to remedy this issue.
In this section of our article, we'll take a look at a few strategies you can use to lower the cost of your insurance premiums. By employing these methods, you'll be able to stand a better chance of finding more affordable policies. Even if these methods don't yield large results, the savings can accumulate significantly.
Don't Underestimate Discounts
Discounts can save you a ton of money. You can access discounts on anything from ‘good grades' to ‘no claims.' If you look at plenty of the top insurance companies, such as All State and Progressive, you'll find there are a host of excellent discounts that you can take advantage of.
Sometimes you won't find a discount advertised on the homepage of an insurance company. Always ask if there are discount opportunities if you can't find any!
One of our biggest recommendations is to shop around for other car insurance policies. We find that many car owners are too loyal to their current car insurance provider. If you want to ensure that you access the best rates on the market, it's critical to shop around for different policies and offers.
This used to be a difficult task, but drivers no longer have to speak to individual insurance brokers to get quotes. Instead, you can now head online and use comparison tools to find out more information about a specific policy or quote. In addition, you can typically receive a quote within a matter of seconds.
If you don't want to use a comparison tool, you can manually apply for insurance quotes on websites. It only takes a few minutes to fill out a form on an insurance companies website. You can then use this to compare against other providers.
Don't hesitate to switch insurance companies if your current provider is offering rates that are too high. Many insurance companies take their customers for granted – don't pay above the industry standard purely because you're a long-time customer of a particular provider.
If you really want to stay with your current insurance company, ask them if they're willing to price-match other offers. Get a quote from a competitor for a similar policy and ask them if they can match the deal.
Consider a Higher Deductible
While it can be daunting to raise your deductible to a higher level, it's often a good idea if you want to save money on your premiums. In many cases, a lower deductible will cost you much more than you think. While this can seem like good savings on paper, if you're not someone who makes frequent claims, it might be more trouble than it's worth.
Speak to your insurance company about the different rates you can access if you're willing to raise your deductible. This is one of the quickest ways to make your insurance less expensive.
Improve Your Credit Score
One of the best ways to access better insurance quotes is to improve your credit score. When your credit score improves, you'll be well-positioned to access much lower rates. This means that insurance companies will likely think that you're more trustworthy.
By paying down debt or fixing any errors on your credit report, you can make drastic improvements to your credit score. Ask your insurance company if they're willing to reassess your rates if your credit score is now higher.
Lower Your Driving Mileage
In some cases, you can access cheaper auto insurance by lowering the number of miles that you travel in your vehicle. This is because many auto insurance providers give discounts to people who have lower car usage.
The less you drive your car, the less likely you are to get into an accident. This means that some insurance companies are able to pass on the savings to their customers. Make sure to ask your insurance company if they offer low mileage discounts – then it will be your responsibility to keep your miles low!
Switch to a More Suitable Car
At the end of the day, if you're paying an extortionate amount of money for your insurance policy, it might be due to the car that you're driving. If you want to access lower rates, you should consider switching to a new car.
While buying a new car can be expensive, if you can find a way to switch to a more insurable car without spending more money, this can be a great option. Alternatively, if you install certain safety features, you might be able to access more savings on your car insurance.
Verdict: Due Diligence Can Save You Tons of Money on Car Insurance
If you're ready to save money on your car insurance, it's essential to perform as much due diligence as possible. By using the strategies in this article, and shopping around for rates, you won't have to pay extortionate amounts for your insurance policy. Make sure to check out the other articles on our website if you need additional information on insurance.
If you're finding that your car insurance is too expensive, you might have a few questions. We receive queries from readers all the time – we'll take a closer look some of the most frequent questions we receive below.
This section contains the general questions we receive about expensive car insurance:
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Why is my car insurance so high?
Your car insurance price is made up of a variety of factors, so there won't be a single reason that it's high. You have to consider your driving record, car, age, neighborhood, and other factors.
How expensive is car insurance?
This will depend entirely on your personal circumstances, your car, your neighborhood, and a host of other elements. If you want to know how expensive car insurance is, ask an insurance company for a free quote.
Why is my car insurance so high with a clean record?
If you have a clean record, your car insurance might be high because you drive an expensive car, live in a bad neighborhood, or have a poor credit score. You can always ask your insurance company why your rate is so high.
Is car insurance more expensive when you lease?
Yes, if you lease a car it will likely be much more expensive. While there are a variety of reasons for this, the most likely cause is that the company that you're leasing from will require that you have industry-leading insurance. Related: Is there a car insurance grace period after termination?
Why is car insurance so expensive for young drivers?
Auto insurance companies view young drivers as potential risks. Because young drivers have less experience, they're much more likely to get into accidents. This is built into the cost of your insurance.
What is the least expensive car insurance?
If you don't purchase comprehensive insurance, you won't have to pay as much. But this will mean that you don't have access to theft protection and other insurance benefits.
What are the 5 most expensive states for auto insurance?
While the most expensive states for car insurance can vary depending on the year, the following states are often the five most expensive: Michigan, Louisiana, Florida, Oklahoma, and Washington, DC.
Why is car insurance so high for new drivers?
New drivers are new to the roads, which means they're much more likely to get into accidents. For this reason, insurance companies mitigate the risks associated with new drivers by increasing car insurance rates. Related: What are the cost differences between full coverage vs liability car insurance?
Who has the least expensive auto insurance?
The least expensive insurance policy will depend on your individual circumstances. While one insurance company might be cheap for one person, it can be more expensive for another. Get multiple quotes to ensure you get the best rate.
Why is car insurance more expensive for drivers under 21?
Drivers under the age of 21 are the least experienced drivers on the road. This means that they have potential to make mistakes and cost their insurance companies money.
Why is car insurance so high for young male drivers?
Young male drivers are typically the most at-risk category when it comes to reckless driving and traffic accidents. This means that insurance companies charge more to protect themselves from the costs associated with young male drivers. Related: Do I need full coverage insurance?
How expensive is car insurance in CO for a 17-year-old?
While Colorado isn't one of the most expensive states for insurance, it's still expensive to insure a 17-year-old – they're not experienced drivers. This means that you'll need to get multiple quotes to determine which company is willing to offer you the best rate – there's no set price for insurance.
How much more expensive is commercial auto insurance then personal auto insurance on average?
This question isn't as simple as it sounds. The reality is that commercial insurance can be more expensive or less expensive than traditional personal insurance. This is because it depends on car types, neighborhoods, number of drivers, and a host of other factors.
Why is car insurance so expensive for students?
Students are typically the youngest demographic, which makes them the riskiest drivers. For this reason, insurance companies will charge them more for auto insurance. Still, you can unlock student discounts which will reduce the cost of your insurance with certain providers. Related: Where can I find affordable liability car insurance?
Why car insurance so high with teen females?
It's not just teen females that have high car insurance rates, it's all teens! The younger you are, the more that you'll pay. While this might seem unfair, it's because insurance companies need to protect themselves against risky drivers.
Why is auto insurance so high for elderly?
It's not just young drivers that have to pay more for auto insurance – the elderly pay a premium as well. This is because elderly drivers are often riskier than middle-aged drivers. As you age, your ability to drive safely can sometimes decrease. Still, you can access some senior discounts from certain auto insurance companies. Related: What to do if I can't afford car insurance?
Why is car insurance so expensive for 18 year olds?
It's not just 18-year-olds that have expensive insurance policies, it's actually any young driver. If you're under the age of 25, you're likely paying more money for your auto insurance than someone that's middle-aged.
Is car insurance more expensive when you have a suspended license?
Car insurance will likely be more expensive if you have a suspended license. Why is this? Simply put, a car insurance company will view you as high risk if you have a suspended license. This means they'll worry about you getting into an accident and costing them money.
How expensive is SR22 Car Insurance?
If you're searching for car insurance in a specific state, you may have questions that are only relevant to your area.
Why is Michigan car insurance so expensive?
The reason that your car insurance in Michigan is so high is because it's the most expensive state for car insurance in the entire country. Drivers here pay more for their premiums than in any other state in the country.
Why is Florida car insurance so expensive?
Florida is the third-most expensive state for auto insurance in the United States. This is largely because there are so many uninsured drivers in the state – traffic statistics in the state are also particularly bad.
Why is auto insurance so expensive in Texas?
Texas is known for having expensive auto insurance, but the reason behind this is quite easy to understand. As Texas is known for its poor public transport infrastructure, people are much more likely to drive. Residents in the state drive more than others, which makes insurance more expensive.
Why is car insurance so expensive in South Carolina?
South Carolina is unfortunately enough to be one of the most expensive states in the country for auto insurance premiums. If you want to lower your auto insurance rates, you should consider switching to a new insurance company.
Why is car insurance so expensive in California?
There are a variety of reasons that contribute to the high cost of insurance in California, but one of the primary factors is the large population. With so many drivers on the road, there's bound to be more accidents.
Why is Louisiana car insurance so high?
There are a variety of reasons that point towards high rates of insurance in Louisiana. Not only are there many accidents in the region, which increase the cost of insurance, but there is also cheap gasoline – this makes it much more affordable to drive frequently.
Why is car insurance so expensive in New York?
Parts of New York are some of the country's most densely populated areas, which means that there are high levels of congestion. This can naturally cause more accidents and increase insurance costs.
Why is car insurance so expensive in Colorado?
While Colorado hasn’t traditionally been one of the most expensive states for auto insurance in the country, the increasing population in the region is causing a hike in insurance rates.
Why is car insurance so expensive in Washington?
Car insurance in Washington doesn't have to be extortionate. If you're paying too much for your car insurance in Washington, you should consider switching to a better car or changing your insurance provider.
Why is NJ car insurance so expensive?
New Jersey is a highly-dense area to live – there is a large population in a small space. This creates a natural environment for congested roads and traffic accidents. This is one of the many reasons you pay so much to insure a car in New Jersey.
Why are auto insurance rates so high in Arizona?
Arizona is full of ‘high-mileage' commuters that can increase the cost of insurance. For this reason, it's essential to shop around for better car insurance rates if you want to find an affordable option.
Why is auto insurance so expensive in Pennsylvania?
If your insurance in Pennsylvania is expensive, it might be because your driving record is sub-par. Make sure to compare your current rates against other insurance companies before you assume you're paying too much.
Why is auto insurance so expensive in Illinois?
If you're paying too much for car insurance in Illinois, it might be because you're using the wrong insurance company. Make sure to check the rates of multiple providers before you assume it’s a statewide issue.
Why is car insurance so expensive in Rhode Island?
While many reasons may contribute to the cost of high insurance in Rhode Island, some researchers suggest it's because of body shop legislation in the state. This legislation keeps repair costs high.
What are the most expensive zip codes for auto insurance in California?
While the most expensive zip codes can vary, the most expensive area for car insurance in California is North Hollywood. The zip code with the most expensive rates is 91605.
Will my All State car insurance be less expensive when I move from NY to Florida?
While this will vary depending on a variety of factors, your premiums will likely increase if you move to Florida. The state is known for having some of the most expensive insurance in the country.
Car Type Questions
If you have a specific type of car, you might have a question that pertains to it exclusively. Have a look at our ‘car type' FAQs below:
Why is car insurance so expensive for a Volkswagen Rabbit?
Believe it or not, the Volkswagen Rabbit isn't always expensive to insure. If you're willing to shop around for rates from different insurance providers, you'll likely be able to unlock serious savings.
Why is my car insurance quote so high Kia Rio?
While some insurance companies will charge a lot insure a Kia Rio, there are plenty of insurance providers that can offer competitive rates for this particular brand. Make sure to shop around for quotes if you want to access affordable insurance.
If you have any other auto insurance questions, you're bound to find the answers in the section below:
Why insurance for used car is expensive than the new cars?
It's not always more expensive to insure a used car, but new cars often have more advanced safety features which can make them more attractive to insurance companies. You can reduce your insurance rates on used cars by installing updated safety features. Compare quotes for used car insurance using our form above.
What makes car insurance more expensive?
A variety of factors make car insurance more expensive. Some of these factors include low credit scores, dangerous neighborhoods, high-performance cars, bad driving records, and more.
What would you consider expensive car insurance?
It's hard to determine what's expensive until you know the industry standards. Insurance will vary depending on your car, state, and other factors. Gathering multiple quotes is the best way to determine the relative cost.
Why are insurance rates more expensive on a red car versus a white one?
While many people think that red cars are more expensive than white cars, this isn't the case. If your red car is more powerful than a white car, then it might cost more to insure.
Why does auto insurance get more expensive as you get older?
In some cases, it can get more expensive if you're a dangerous driver in your old age. But in most instances, once you reach 25, your car insurance can reduce drastically. Young drivers are often considered the riskiest. Still, old drivers might pay more than middle-aged drivers.
Why is male car insurance more expensive?
Male car insurance isn't always more expensive, but there does seem to be some evidence that men pay more for car insurance. In some cases, this is because men drive different cars to women, which are sometimes more money to insure.
Why is my car insurance renewal so high?
The exact reason your car insurance renewal is so high will depend on a variety of factors, but you should always make sure that your insurance company isn't ripping you off for your loyalty. If you think you're paying too much, get quotes from other insurance companies.
Why is my car insurance so high when I have no accidents?
It's not just accidents that determine your car insurance rates. Your credit score, age, neighborhood, car, and a host of other factors will also contribute to the cost of your insurance.
Why is car insurance more expensive for newer cars?
Car insurance is sometimes more expensive for newer cars because they are worth more money. If you crash a new car, it can end up costing your insurance company more money if the car is newer.
Why is my car insurance premium so high on an old car?
This depends on a variety of other factors, including your car insurance claim record and credit score. Additionally, there might be issues with the safety features on your car. Newer cars can be safer.
How expensive is commercial auto insurance?
Commercial auto insurance can be expensive if you have large trucks or industrial vehicles. You can sometimes get fleet discounts if you have a large number of cars. If this is a temporary need you can always get 24 hour car insurance coverage.
Is car insurance more expensive when your divorced?
In many cases, car insurance can be more expensive when you get divorced. It's not because insurance companies are penalizing you for getting divorced, but because you can't access the same marriage discounts anymore.
How expensive will car insurance get when you add a teenager?
This depends on your car, location, and a host of other factors. This being said, as young drivers are considered the riskiest, you can likely conclude that your insurance will increase significantly if you add a teenager.