Why Your Car Insurance Is So Expensive

If your car insurance is more expensive than you think it should be, you might wonder — why? Your age, driving record, credit score, location and chosen provider can all impact your premiums. While some of these factors are out of your control, there are steps you can take to reduce your costs.

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There are several ways to get a lower rate if you find your car insurance too expensive. Although some factors can’t or are too difficult to change — like your age or your car’s make and model — there are some options for lowering your premiums.

Switching insurance providers is one such option — you may find other carriers offer a lower rate for similar coverages. Another possibility is to lower your coverage limits, reducing your rates. Improving your credit score and driving record can also make coverage more affordable over time.

Key Takeaways

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Several factors can drive your car insurance premium up. Some are givens, while others are controllable. Focusing on the ones you can do something about may help you find lower policy rates.

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Although improving your credit score or driving record can have some of the biggest impacts on your rates in the long term, there are ways to lower your rates in the present, such as switching to a different provider or finding discount programs.

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Policy rates differ based on location, age, experience and other factors. Compare quotes from different carriers before deciding where to purchase a policy to get the best possible deal for your unique driver profile and needs.

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The Most Important Reasons Your Car Insurance Rates Are So High

Several factors contribute to why your car insurance is so expensive. However, some of these are difficult or impossible to change — like your age. Your state can also significantly influence your car insurance premiums. However, most people wouldn’t move to save on their yearly premiums.

Your car insurance carrier can also have a large impact on your rates. Fortunately, you can change your provider fairly easily, and doing so could mean big savings. For example, GEICO offers car insurance at just $1,047 per year, on average. Metlife sells a similar policy for $1,686. That means choosing GEICO could potentially save you $639 per year.

The Most Common Causes of High Car Insurance Rates
1

Where You Live

States follow different regulations when setting insurance premiums. These measures can affect the overall cost of insurance in the state. For instance, most have different rates for male and female drivers. Some states, such as California, Hawaii and Pennsylvania, don’t allow this practice.

2

Your Insurance Company

Car insurance rates vary between carriers because each calculates premiums differently. For instance, drivers in California pay $707 more per year for a full coverage policy if they purchase it from Allied instead of Esurance.

3

How Old You Are

Typically, providers consider inexperienced drivers to be riskier to insure. Premiums tend to be higher for people younger than 25. Rates tend to increase for drivers 65 and older, too.

4

Your Driving Record

Car insurance providers typically charge lower rates to drivers with clean records than those with violations. Premiums also vary depending on the gravity of your infraction. Full coverage car insurance in New York for drivers with tickets costs an average of $4,287 per year. A driving under the influence (DUI) charge increases your rate to $5,982. In comparison, a policy with similar coverages costs $3,433 for someone with a clean record.

5

Your Credit Score

Having poor credit scores result in costly car insurance rates. For example, if you live in Connecticut, you’ll pay an average of $2,511 annually if you have poor credit standing. In comparison, a driver with good credit only pays $1,442 per year. However, keep in mind that some states don’t allow carriers to use credit scores to determine auto insurance premiums.

6

The Car You Drive

The value of your car plays a role in your insurance costs. Carriers consider variables like possible costs of repairs, the likelihood of theft and engine size when setting rates. Because of this, electric cars, sports cars and high-value cars tend to be more expensive to insure.

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How Much Coverage You Buy

Higher coverage limits typically mean more expensive premiums. The type of coverage you purchase also impacts your rate. Liability-only insurance, which protects you from costs of damage from bodily injuries and property damage in case you cause an accident, costs less overall. In comparison, full coverage policies provide more financial protection but have higher rates.

Ways to Make Your Car Insurance Less Expensive

If you find that your car insurance is too expensive, you can lower your premium in many ways. Switching to a different insurance courier or purchasing policies with lower limits can score you cheaper rates in a short time frame. The best way to get long-term — and possibly more significant — savings involves maintaining a clean record and improving your credit score.

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Your Car Insurance May Be Expensive Because of Your Insurer

  • Why It Makes Car Insurance Expensive: Insurance companies calculate rates differently, so GEICO may be cheap for your neighbor but expensive for you.
  • What You Can Do: Compare quotes from various auto insurance carriers to find companies offering lower rates.

Car insurance providers calculate premiums differently, which can mean vastly different rates for the same coverage limits. Putting in the time and effort in comparing quotes from various carriers can help you find which company offers the cheapest car insurance rates that fit your needs. Because most providers allow you to get quotes online, finding and comparing quotes is relatively simple. Make sure to provide detailed information to get the most accurate estimate possible.

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TIP: TAKE ADVANTAGE OF ALL INSURANCE DISCOUNTS

While comparing providers, be sure to look into the discounts each carrier offers. Discount programs vary between providers and states, but the most common, widely available ones are for bundling, being a safe driver, insuring multiple vehicles and using anti-theft systems.

High Coverage Levels May Make Car Insurance Expensive

  • Why It Makes Car Insurance Expensive: The amount of coverage you purchase affects your car insurance premium. The higher the limits, the more expensive your rate.
  • What You Can Do: Revisit the types of coverages included in your policy as well as your limits. You may want to consider lowering your limits, getting a lower deductible or purchasing liability-only insurance.

Car insurance rates depend on the coverage you purchase — the higher your deductible, the lower your insurance costs. Coverage type can also factor into your rates. For example, liability-only insurance costs $649 yearly in Colorado, while full coverage with 100/300/100 limits costs $1,435. Liability-only coverage is cheaper but may not provide adequate financial protection after an accident.

It’s important to weigh cost and coverage when deciding how much car insurance you need. Typically, MoneyGeek recommends purchasing full coverage insurance because it covers damages to both you and the other driver if you’re at fault in an accident. But, if you need to save money, switching to liability-only coverage can dramatically lower your premiums.

Poor Credit Scores Result in Higher Insurance Rates

  • Why It Makes Car Insurance Expensive: Car insurance companies consider credit scores when setting premiums. Drivers with poor credit standing get higher rates because companies consider them riskier to insure.
  • What You Can Do: Improve your credit standing to get lower rates from insurance providers.

Studies have shown that individuals with good credit practice better financial management methods, making them less risky to insure. Most states allow insurers to use credit scores when setting premiums, but some don’t allow this practice, including California, Hawaii, Maryland, Michigan and Massachusetts. If you have bad credit, you can improve it by paying your bills on time, using an automatic bill pay system and disputing any errors in your statements.

A Bad Driving Record Leads to More Expensive Insurance

  • Why It Makes Car Insurance Expensive: Having violations on your driving record results in higher car insurance premiums. Rates are also higher for more severe infractions. For example, insurance is more expensive for drivers with DUIs than drivers with speeding tickets.
  • What You Can Do: Improving your driving record helps decrease your rate in the long term, but you can try other approaches, such as attending a defensive driving course or monitoring your driving record.

Drivers with poor driving records are riskier to insure, resulting in higher car insurance rates. The severity of your violation affects how much your premiums increase — for example, the average insurance premium increases from $1,424 to $1,836. Being at fault in an accident makes it even higher, but a DUI conviction leads to the most expensive car insurance — on average, $2,879 annually. Moving violations typically stay on your record for an average of three years, but this amount of time varies depending on your state.

Some Factors That Make Car Insurance Expensive Are Difficult to Change

Some factors that significantly impact the cost of car insurance are outside your control. Age is one of them, as well as your driving experience. Other factors may not be worth the effort it takes to change — such as the state you live in or the kind of car you have.

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FACTORS THAT MAKE CAR INSURANCE EXPENSIVE THAT ARE HARD TO CHANGE

Young Drivers Have More Expensive Car Insurance

  • Why It Makes Car Insurance Expensive: Providers factor in personal details — such as age and gender — when setting premiums. The number of years you've been driving also contributes to the cost of car insurance.

Car insurance rates are affected by age and gender, with young, first-time drivers getting more expensive premiums. Like all skills, driving is something you get better at over time. Because young drivers don’t have much practice on the road, insurance companies see them as riskier to insure. Inexperienced male drivers also pay a higher premium than females for similar reasons because providers consider them to be less safe drivers. The difference in rates between males and females evens out as drivers of both genders gain experience.

Certain States and Cities Have Higher Insurance Rates

  • Why It Makes Car Insurance Expensive: Although the average cost of car insurance across the board is $1,265 per year, the actual rate of each state varies. State-specific regulations and demographics primarily cause this difference.

Each region follows a specific set of insurance laws, resulting in varying car insurance rates in different states. In Michigan, the average full coverage policy costs $4,003. This high rate is mainly due to the state's no-fault insurance law and many uninsured drivers. Drivers in New York pay $3,896 for a policy with similar coverage because of the state’s large population. Densely populated areas increase the likelihood of injuries or fatalities from car accidents.

Some Car Models Are Pricier to Insure Than Others

  • Why It Makes Car Insurance Expensive: Your car’s age, how much you pay for repairs after an accident, and the likelihood of it getting stolen contribute to why insurance prices are so high. Sports cars or luxury vehicles are more expensive to insure than less flashy models.

The type of car you choose to drive contributes to your insurance costs. For example, you’ll have to pay $3,096 annually for a 2020 Nissan GT-R but only $1,172 if you have a Honda CR-V. Based on MoneyGeek’s study, the cheapest car types to insure are the Honda CR-V, the Subaru Outback and the Honda Fit. The vehicle’s age also affects the rate, so if you want a flashier model, purchasing a used one may help you find lower rates.

Average Cost of a Full Coverage Car Insurance Policy By 2021 Model*

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*All car insurance rates are for the 2020 model except for the Nissan 350Z (2009 model) and Jeep Patriot (2017 model).

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About the Author


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Mark Fitzpatrick is a senior content manager with MoneyGeek specializing in insurance. Mark has years of experience analyzing the insurance market and creating original research and content. He graduated from Boston College with a Bachelor of Arts and Johns Hopkins University with a Master of Arts.