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Why Is Car Insurance So Expensive?

Factors related to your driving history, personal information and market conditions can drive up the cost of your car insurance policy. Multiple at-fault accidents, a poor credit score and driving inexperience are common examples that will increase car insurance rates. Generally, any factor that increases your risk of having an accident and likelihood of filing a claim will result in higher premiums.

15 Factors That Can Make Car Insurance Expensive

Below we’ve compiled 15 factors that may be driving up the cost of your car insurance policy:

#1 You Purchased Additional 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. Full coverage offers additional protection, namely collision and comprehensive coverages, but costs more than minimum liability policy.

Full coverage offers additional protection but costs more than minimum liability policy.

#2 You Increased Your Coverage Limits

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

For example, California’s minimum requirements are fairly low — only $15,000 per person for bodily injury liability coverage and $5,000 per accident for property damages. Say you get into an at-fault accident and the other driver was severely injured and their car completely totaled. The costs will likely exceed the limits on a minimum liability policy and you will need to pay the difference out of pocket.

#3 You’ve Added Endorsements to Your Policy

Purchasing auto policy endorsements offer useful benefits, such as covering the cost of a rental car while your car is undergoing repairs after a covered accident, but it will increase the cost of car insurance. Common car insurance endorsements worth considering include:

#4 Car Prices Are at an All-Time High

Higher car prices mean higher insurance premiums because car prices affect the cost to replace your car if totaled in an accident. The average cost of car insurance exceeded $47,000 in December 2021, according to Kelley Blue Book — a near 40% jump from $33,845 in 2016. Several factors point to higher car prices, such as advances in technology and inflation. Moreover, the global chip shortage is keeping supply low and prices high for certain models.

#5 Newer Car Models Need Specialized Technicians

Car models today 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.

#6 You’re a Young and Inexperienced Driver

Insurance companies charge younger drivers higher rates because they are more likely to get into an accident. Inexperienced teenage drivers are less likely to recognize dangerous situations and more likely to get distracted behind the wheel, leading to more crashes compared to older and more seasoned drivers. Studies have shown that newly licensed 16-year-old drivers are 1.5 times more likely to get into a crash than 19-year-old drivers.

Car insurance rates will typically decrease when you reach age 25 (assuming you maintain a clean driving record).

Higher car prices mean higher insurance premiums because car prices affect the cost to replace your car if totaled in an accident.

#7 You’re a Male Driver

Data shows men are more likely to drive recklessly and more often than women, which can result in paying higher premiums.

Men are more likely to engage in risky driving, such as driving while under the influence and speeding, which increases the chances of causing a dangerous or fatal car accident. Therefore, insurance companies increase premiums for male drivers to account for their higher risk exposure.

Men are also more likely than women to have higher annual mileage across all age groups. According to the Bureau of Labor Statistics, men are more likely to commute further for work and are more likely to work over 40 hours per week. Since men spend more time on the road, they are more likely to get into an accident and file a claim.

*Some states, like California and Montana, have prohibited the use of gender as a rating factor.

#8 Your Location Has a High Crime Rate

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

#9 You Have a Low Credit Score

Drivers with low credit scores are more likely to receive higher car insurance rates because they are more likely to file an insurance claim. Insurance companies reward drivers with excellent credit with lower car insurance premiums because they are perceived as more responsible drivers and less likely to default on making payments.

*The use of credit scores as a rating factor is banned or restricted in some states, like California, Hawaii and Maryland.

#10 Your Driving Record Shows Reckless Driving Behaviors

If your driving history reports multiple accidents and traffic violations, expect higher car insurance premiums. A poor driving history is proof of a high-risk customer and insurance providers raise costs accordingly.

Many car insurance companies incentivize clean driving records with safe driving discounts. It pays to drive safely.

Market factors, such as inflation and higher car and repair costs, can also increase the cost of auto insurance.

#11 You’re Single

Claims have shown that married couples are less likely to file a claim, suggesting that single drivers are less responsible than married drivers and are more likely to cost the insurance company a claim payout.

Married couples also pay less for car insurance than single people because they can qualify for a multi-vehicle discount.

#12 You Have a 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 are to get into a car accident.

Tip: If you’re a low mileage driver — typically 10,000 miles or fewer — consider a pay-per-mile policy, which prices your policy based on how much you drive.

#13 You Have a High-Risk Driver on Your Policy

All it takes is a single high-risk driver to raise premiums for all listed drivers on an auto policy. When calculating premiums, car insurance companies rate the risk factors for every household member because vehicles are sometimes shared between drivers. If every driver in the policy has a clean driving record except one, you may want to list that person as an excluded driver to keep your car insurance premiums low.

For example, say an entire family is listed on a single auto policy. However, the son has two DUIs and multiple speeding tickets, increasing the policy premium by hundreds of dollars. Since the rest of the family has clean driving records, the father lists his son as an excluded driver and he sees their premiums decrease. However, the son will not be covered if he borrows any of their cars.

Younger drivers are more likely to pay higher auto insurance premiums because their driving inexperience increases the likelihood of having a car accident.

#14 You’re Not Bundling

If you’re not taking advantage of your insurance carrier’s bundle discount, you’re missing out on considerable savings. Drivers may save 10% to 25% just by purchasing home and car insurance from the same company.

Bundling isn’t just home and auto, either. You may still qualify for a bundle discount if you purchase renters insurance, life insurance, pet insurance.

#15 You Drive a Luxury or Sports Car

Luxury cars and sports cars are typically more expensive to insure than non-luxury vehicles. Sports cars are high-performance vehicles and their high horsepower poses a risk to your insurance company. Luxury cars tend to carry higher price tags and expensive replacement parts. Insurance companies raise premiums to offset these risks and costs.

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FAQs

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. Ask your insurance carrier about available discounts that you may qualify for to further lower your costs.

Is car insurance more expensive when you’re younger?

Younger drivers are more likely to pay higher auto insurance premiums because their driving inexperience increases the likelihood of getting into a car accident. Credit score is a common rating factor in some states and young drivers may face higher rates for having a low credit score or insufficient credit history.

Are there ways to get cheaper auto insurance rates?

Driving safely and maintaining a clean driving record can help you avoid paying surcharges and deductibles. It can also qualify you for a safe driver discount. Shopping around can help you find a new provider that offers the same coverage at a lower price, too.

Key Takeaways

  • Several factors that contribute to higher auto policy costs include purchasing more coverage, being a young and inexperienced driver, having a poor credit score and having multiple at-fault car accidents and traffic violations in your driving history.
  • Market factors, such as inflation and higher car and repair costs can also increase the cost of auto insurance.
  • Shopping around can help you find the cheapest auto insurance available.

Whether you have a poor credit score or a recent traffic ticket, finding an affordable auto policy is possible. SmartFinancial’s FREE tool analyzes multiple insurance carriers in your area to match you with a policy that meets your coverage needs and budget. Just enter your zip code below or call 855.214.2291 to receive your free car insurance quotes.

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