Why Your Car Insurance Is So Expensive

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 offering a lower rate with similar coverage. Another way to lower your rates is to lower your coverage limits.

• Reasons Your Car Insurance Rates Are So High
• Ways to Make Your Car Insurance Less Expensive
• Factors That Make Car Insurance Expensive Are Difficult to Change
• Read More About Car Insurance

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.

A claim on your record might negatively affect your risk profile and lead to higher premiums when you renew your policy. If you want to avoid a rate increase and can avoid paying out-of-pocket, you can cancel your car insurance claim.

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.

The best time to shop around for car insurance is every year prior to your policy renewal. Shopping around yearly for car insurance quotes can help you snag the best possible price with the coverage you need.

• 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.

• 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.

• 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.

• 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 can increase 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 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.

• 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.

• 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.

MoneyGeek analyzed the cheapest car insurance in each state and created a list of the best car insurance companies offering affordable full coverage policy rates.

• 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 for a Honda CR-V. The cost of insuring an electric vehicle like Tesla will differ depending on the year and model. But all will have a higher price tag.

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.

Based on MoneyGeek’s study, the cheapest car types to insure are the Honda CR-V, the Subaru Outback and the Honda Fit.

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