Why Is Car Insurance so Expensive?

Why Is Car Insurance So Expensive

Car insurance. It’s a necessity if you want to drive legally just about anywhere in this country, and there’s no getting around the fact that it is expensive. But why is that? And is there anything you can do about it?

Many factors go into setting your car insurance premiums, and while there are some over which you have no control, there are others that you can influence to some degree to help you bring your cost down.

Reasons why your car insurance is high

Let’s look at some reasons why your prices may be so high. Insurance is a tricky equation that factors in a multitude of different concerns and statistics: some past, some present, some actual, some theoretical. It’s a complicated business!

Age: If you are under 25, you are going to pay more for your policy. This is because drivers between the ages of 16 and 19 are over twice as likely to be in a fatal collision than drivers over 20, according to the U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA). This is due to a higher likelihood of speeding and disregarding traffic guidelines, and it’s all compounded by a lack of experience that only comes with time.

Gender: Men, particularly those under the age of 25, have higher coverage rates because statistically, they pose a higher risk than women. Approximately two-thirds of teenagers killed in motor vehicle crashes in 2018 were men.

Location: Your zip code matters, too. If you live in a city, your rates will be higher due to the inherent congestion and more consistently busy lanes that typically result in more accidents. Small town or rural areas typically have lower rates as a result.

Other location considerations include neighborhoods with high rates of auto theft or vandalism, the history of accidents in that area, and even weather patterns such as frequent flooding or fires. Insurance policy costs also vary from state to state, since some states charge a higher coverage premium.

Low Credit: If you have no credit history or your credit score is below “excellent,” you will pay more for coverage premiums. Your credit score is based on your financial habits, so when you pay your bills on time, insurance companies are more likely to give you better rates because you are considered less of a risk. Remember, insurance is ultimately about reducing risk, so if companies see a negative pattern of delinquency, liens, or taxes you’ve refused to pay, that pattern is believed to translate to your ability to drive responsibly.

Past Claims: If you’ve filed multiple claims in the past and have a poor driving record history, you are more of a risk to insure, and so your coverage premiums will be higher.

Also, if you’ve caused an accident that resulted in an insurance claim, it could increase your premiums, although this is not always the case. If you are at fault for an accident resulting in over $2,000 in damage, you could see an increase in your premiums by almost 50%. No-fault accidents can also drive up your premiums.

It’s also worth mentioning that traffic tickets for moving violations, especially reckless driving and driving while intoxicated, are a factor because your insurance company is evaluating how safe you are as a driver.

Car Type: Not surprisingly, the type of car you drive plays a role in the rate for which you qualify. Not only are luxury and muscle cars more expensive to purchase, but they will also cost more to repair or replace. The difference can sometimes be more than twice the amount to insure one of these cars versus a compact sedan.

Additionally, statistics show that certain car makes and models have a higher rate of being stolen or are in more accidents. The overall safety record, crash rating, and safety features of a vehicle are all included in the risk evaluation.

Policy Type: You have many options to choose from when you purchase a policy. You will want to consider the options very carefully and base them on your specific needs. If you choose a liability policy with only the state minimum coverage limits, it will cost you less than if you pay for full coverage. You may want to choose this option if your car is old or not worth much more than the deductible amount.

If you want to protect your assets more thoroughly, you may want more complete coverage in your policy. However, if you choose higher levels of collision and comprehensive coverage, the amount of your deductible(s) will influence your overall cost. Going with a higher deductible will reduce your premium, whereas a lower deductible will increase your premium. Remember, the deductible is the amount you will have to pay out of pocket before the coverage kicks in.

Insurance Gaps: Insurance companies like to see a continuous coverage history, with no gaps between coverage. Coverage doesn’t have to be with the same company, but unless you want to see your coverage increase, be sure that your move from one plan to another is coordinated to ensure a seamless transition. Also, if you’ve had your insurance policy canceled in the past, it will be difficult to get coverage again, so be sure to stay on top of whatever plan you currently have!
How to lower your rates

How to get a better rate

Increase your deductible(s)

If you increase your deductible so that you pay more upfront, your policy rate will decrease.

Liability vs full coverage

Liability covers the potential cost of damage you may cause to others while driving, including medical care for anyone involved, and is usually required in most states. Full coverage includes both collision and comprehensive insurance and generally means the cost of damage to your vehicle will be covered.

Shop around

Be sure to compare the same types and amounts of coverage, as well as the same deductibles, to see what best fits your needs! Call Affordable Car Insurance Tampa at (813) 328-1985 for a free 10-minute quote. We are experts at insurance and at saving you money!

Byron Johnson Blog Icon By: Byron Johnson