Why Are My Car Insurance Rates So High?

Factors related to your driving history, personal information, market conditions and any factor that increases your risk of having an accident and the likelihood of filing a claim can drive up the cost of your car insurance premiums. However, some situations, like a more expensive plan or missing out on discounts, could result in you paying more than you need to for the same level of coverage.

Keep reading to learn more about why your car insurance is so expensive and what you can do about it.

What Factors Make Car Insurance So Expensive?

When calculating car insurance rates, insurers measure a policyholder's likelihood of filing a claim, looking at the driver’s past driving infractions, location, vehicle model, mileage and other factors. As a result, if your driving history shows that you have several car accidents and moving violations, your annual mileage is above-average and you drive an expensive car, then insurers will offset your risk by increasing your car insurance premium.

That said, voluntary factors, like purchasing optional additional coverage or not taking advantage of discounts and bundles, can also result in a higher premium. Below are some of the factors that might lead to an increase in your car insurance costs.

Full Coverage

Most states mandate that drivers meet certain minimum liability requirements but you may also need to purchase full coverage if you have an outstanding car loan or you’re leasing your vehicle. Since you’re paying extra for full coverage, you’ll naturally pay a higher rate. After paying your car loan, you can consider dropping full coverage and opting for a minimum liability policy to save money.

Increased Coverage Limits

Increasing your insurance coverage limits may offer additional coverage and peace of mind but it comes at an additional cost. However, it may be worth the added expense in states with lower limit requirements.

While cheap car insurance may seem like a good option, it often leaves you with limited coverage that won’t cover all situations, especially if they’re costly.

For example, California’s minimum requirements are fairly low — only $15,000 of liability coverage per person in a single accident or up to $30,000 for all persons in a single accident and $5,000 per accident for property damages.^[1] Say you get into an at-fault accident, resulting in severe injuries for the other driver and their passengers and their car being totaled. The costs will likely exceed the limits on a minimum liability policy and you will need to pay the difference out of pocket.

Added Endorsements to Your Policy

Purchasing endorsements or riders from your insurance company can offer useful benefits, such as covering the cost of a rental car while your car is undergoing repairs after a covered accident, but may increase auto insurance costs. Common car insurance add-ons include:

• Gap insurance
• Modified car coverage
• New car replacement insurance
• Rideshare insurance
• Car rental insurance
• Roadside assistance

High Car Prices

Higher car prices mean higher insurance premiums because car prices affect the cost of replacing your car if it is totaled in an accident. The average cost of a new car is around $47,400 for cars sold in January 2024, with factors like technological advances and inflation leading to these higher car prices.^[2] While these prices have slowly dropped in recent months, they’ve ballooned by nearly 22% over the past five years.^[2][3]

Specialized Technicians Needed for Newer Car Models

Today's cars are essentially computers on wheels equipped with safety features to help deter collisions. Technology helps lower accident rates but also demands specialized technicians to repair damages. Not all mechanics understand how to troubleshoot, replace and calibrate sensors on newer models and you may need to pay extra to hire a professional who does.

Young Male Drivers

Young and inexperienced drivers are considered more accident-prone, often leading insurance companies to charge younger drivers higher rates. Teen drivers are four times more likely to get into an accident for every mile driven than those ages 20 and older.^[4] Car insurance rates typically decrease when you reach age 25 (assuming you maintain a clean driving record).^[5]

Your sex can also result in higher rates — men are more likely to exhibit risky driving behaviors and often have more severe crashes and can pay higher rates as a result.^[6] If you’re a young male driver, this can have a compounded effect, with 20-year-old males paying $434 more for full car insurance coverage and $121 more for minimal coverage compared to 20-year-old females in 2022.^[7] This gender gap tends to mostly even out after turning 30, provided all other factors remain the same.^[7]

However, gender won’t affect your rates in some states, like California and Hawaii, where using gender as a rating factor is prohibited.^[8]

High Crime Rate Locations

If you carry comprehensive coverage, your car insurance rates can increase if you live in an area with a high crime rate. Comprehensive insurance pays for losses from theft and vandalism and insurers charge drivers higher rates if they are more likely to file a claim. Generally, drivers in urban areas with high crime rates will pay for comprehensive coverage more than drivers in rural areas and low-crime suburbs due to the statistical risk of a claim from their area.

Low Credit Scores

Drivers with low credit scores are more likely to receive higher car insurance rates because studies have shown that they are more likely to file an insurance claim.^[9] A car insurance company typically rewards drivers with excellent credit with lower auto insurance rates because they are perceived as more responsible drivers and less likely to default on making payments. Much like factoring gender, some states like California and Hawaii, have prohibited using credit scores when determining someone’s premium rates.^[10]

Reckless Driving Behaviors on Your Driving Record

You can typically expect higher car insurance premiums if your driving history reports a car accident or traffic violation, especially if there are multiple incidents. A poor driving history is evidence of a high-risk customer and insurance providers raise costs accordingly, which can last for a significant period of time. For example, after receiving a DUI, your car insurance rates may increase and remain higher for at least 10 years.^[11]

Many car insurance companies incentivize clean driving records with safe driving discounts, giving you an added incentive to drive safely.

Marital Status

Single drivers may be charged higher premiums than married drivers because insurers may consider married drivers as more risk-averse. In addition, a single driver may not qualify for a multi-vehicle discount, which can reduce your premium if you insure multiple vehicles on the same policy. For two married persons who each own a car, qualifying for a multi-vehicle discount is often a given. That’s why if you become recently divorced, you may see an increase in your car insurance premium due to no longer qualifying for such discounts.

High Annual Mileage

Drivers will generally see their premiums increase with their annual mileage. Statistically, the more time you spend on the road, the more likely you will get into a car accident. If you’re a low-mileage driver, which could be 7,500 miles or less (but this will depend on your car insurance company), you may want to consider a pay-per-mile policy, which prices your policy based on how much you drive.^[12]

Not Asking About Discounts

Many car insurance companies offer discounts that can cut your premium considerably. For example, you may be missing out on considerable savings if you’re not taking advantage of your insurance carrier’s bundle discount by purchasing homeowners insurance and auto insurance from the same company.

Driving a Luxury or Sports Car

Luxury and sports cars are typically more expensive to insure than non-luxury vehicles due to their higher price tags for part replacement and the vehicle itself. For example, these high-performance vehicles often have higher horsepower that can increase the severity of a collision. This poses a risk to your insurance company, as more people may become severely injured and the cost of repairs or replacing the vehicle is higher, resulting in higher insurance rates for luxury and sports cars.

Is It Common for Car Insurance To Be Expensive?

Car insurance costs can be expensive, with an average monthly rate of $142 for full coverage and $40 for minimal coverage.^[13]. Remember that what is “expensive” may vary depending on your needs and circumstances. The most important means of reducing your costs is to shop around to ensure you’re getting the types of coverage you need at an affordable price based on your finances.

That said, certain market factors completely out of your control like inflation and local repairs costs, may also be driving up the cost of car insurance.

Even so, controlling factors mostly within your control like committing to drive safely, taking advantage of discounts and shopping around regularly can keep your car insurance premium as affordable as possible.

How Do I Know if I’m Overpaying for Auto Insurance?

If you shop around and see other insurers offering lower auto insurance rates with the same level of coverage your current policy offers, you are likely overpaying for auto insurance. Try comparing quotes from three to five car insurance companies to determine how much you overpay for the same coverage. You’ll need to offer information on your car’s model, alongside personal information such as your age and location, to each insurer, which can become tedious and repetitive to give again and again.

Fortunately, you can find better comparison rates faster using an insurance marketplace like SmartFinancial. After answering a few quick questions, we can set you up with a licensed insurance agent to help you find the best policy to fit your needs without overpaying. Compare auto insurance costs at no cost to you today.