Car owners throughout the U.S. almost always need to have a car insurance policy. With the financial considerations involved and the risks drivers face on the road, it is important to weigh the cost of car insurance carefully. Do you think your car insurance is too high? If so, you can find cheap car insurance by shopping around.
In certain ways, your car insurance costs may be a reflection of you and your driving habits. Auto insurance providers often base the rates they charge on important factors. Some of these include your credit score, where you live, your driving record, and the type of car you drive. Therefore, if your premiums recently shot up or seem too high, you need to determine the possible reasons for it.
Factors that Determine How Much You pay For Car Insurance
Virtually every state across the U.S. requires drivers to have a certain level of liability coverage. However, as a car owner, you have a great deal of flexibility in choosing the type and amount of coverage on your policy.
According to a recent analysis by Bankrate.com, car owners in America paid an average of about $1,674 per year for full coverage auto insurance. This figure included liability, collision, comprehensive, and underinsured or uninsured motorist coverage. However, this amount is just the average. Your rate could be lower or higher, depending on various factors.
“Why is my car insurance so high?” This is a question that most car owners ask themselves at one time or another. This is because your auto insurance premiums are often a variable expense. Car insurance can also account for up to 2.4% of your yearly income.
Are you looking for ways to spend less on car insurance? If so, you need to understand the factors that affect your insurance premiums. For instance, you cannot control variables such as the frequency of claims based on geographic location. However, you can control components such as your driving record, insurance history, and the type of car you own.
Average car insurance premiums greatly vary by the individual car owner. Therefore, comparing your car insurance policy with your friend’s policy will probably not be particularly helpful. So, instead of asking yourself, “Why is my car insurance so high?”, it’s best to study your lifestyle and driving habits to pinpoint the causes of your expensive premiums.
Fortunately, you can take certain steps to lower your rates. Some of the reasons why your car insurance is high include the following:
Reason: You Have Bad Credit
In most states, auto insurance companies use your credit score when calculating your car insurance premiums. Therefore, if you have a poor credit score, you may end up having to pay higher insurance premiums. However, the cost increase may depend on the auto insurance provider you choose and where you live.
According to the Insurance Information Institute, credit-based insurance scores are confidential ratings based on the insured individual’s credit information. Many insurance providers use credit scores in combination with other factors to help determine premiums. This is typically the case for insurance lines such as personal car insurance.
What to Do About It: Invest in Credit Repair Services
According to actuarial studies, insured car owners with poor credit scores are a higher insurance risk. This is because they tend to file more claims. Taking the necessary steps to improve your credit score may simultaneously lower your insurance premiums as well.
Before you ask your insurance provider, “Why is my car insurance so high?”, keep in mind that not all insurers calculate rates in the same way. Therefore, one carrier may weigh your credit score more heavily than another. For instance, auto insurance companies based in California, Massachusetts, and Hawaii do not even consider credit scores when calculating premiums.
However, if you have a poor credit score, you need to take the necessary steps to improve it. This is where credit repair services can come in handy. Credit repair companies act on behalf of their clients by working with credit agencies for a fee.
Therefore, look for an effective and reliable credit repair company with excellent customer service. If you do not have the time or knowledge to repair your credit score, you can always pay an expert to do the work for you.
Reason: Poor Driving Record
Before giving you a car insurance policy, all insurance providers will want to know your complete driving record. This includes your traffic violations and accidents you had in the past. Even if the handful of accidents you had did not happen recently, you might still have to pay higher insurance premiums. The same applies to traffic violations.
However, if you have a clean driving record, you should enjoy lower insurance premiums. When it comes time to renew your policy, your insurance provider will check your driving record for DUIs, accidents, speeding tickets, and other traffic violations.
Your premiums may increase by as much as 20% after a speeding ticket. A DWI or DUI will cost you significantly more. You will also have to pay steep fines and attorney fees, in addition to an average premium increase of up to $800.
The reason for this difference in rates is that drivers with poor records are more likely to make more claims in the future.
What To Do About It: Take A Defensive Driving Course
Some states allow drivers with a poor driving record to take a defensive driving course to reduce the effects of a ticket on their records. When you complete and pass an approved driving course, your insurance provider may give you a discount. However, in the case of a car crash, the only way to reduce your rates is to wait.
You may also reduce the number of points on your license by taking approved courses in accident prevention, defensive driving, or other related topics. Before you sign up for any type of class, ask your insurance provider if doing so makes you eligible for a discount on your premiums.
The effort you make and the cost of the course should translate into savings that are big enough. You also need to sign up for an accredited driving course based on the rules in your state.
Reason: Coverage Levels and Types
The type of coverage you choose and the level of insurance you have can greatly influence your insurance rates. Every state decides its own rules and requirements for minimum coverage requirements on any type of policy.
For example, some states have basic minimum requirements for property damage and bodily injury coverage. Others require additional coverages such as underinsured and/or uninsured motorists and personal injury protection or medical payments coverage.
A state like South Carolina, for instance, requires drivers to carry the following:
- A minimum coverage of $25,000 per person for bodily injury
- $50,000 per accident
- $25,000 in uninsured motorists’ coverage and property damage coverage within the same limits
Since the minimum requirements for drivers differ by state, you may start with different rates and coverages just on a basic liability insurance policy alone. Furthermore, if your car has a lien, you may need to have additional coverage or higher limits, which would affect your annual rates.
The answer to the question “Why is my car insurance so high?” may lie in the type of coverage you have. Generally, the more coverage your car has, the more you should expect to pay.
For example, do you have a full coverage insurance policy, which includes collision and comprehensive coverage? If so, it may cost you about 170% more in premiums than a policy with liability coverage only.
What to Do About It: Change Your Coverage
You have total control over the type of coverage to include on your policy. Therefore, if you feel that your premium is too high, you should consider reducing your limits. You just need to meet your insurer’s requirements and stay above the legal limit. However, in the event you get into an accident, you will be responsible for claims that go above your coverage limits.
Therefore, it is vital to have the right type of insurance for your car. You may also want to look into auto insurance providers that offer accident forgiveness coverage. This type of coverage will prevent your insurance rates from automatically increasing after an accident.
Reason: Your Claim History
Even if you only have a couple of accidents on your driving record, the resulting payouts will impact your insurance premiums. Of course, a driver with a couple of minor fender benders is a significantly lower risk than one who previously totaled several cars.
Whether the accidents were your fault or not, the number of claims you file will have an impact on your insurance rates. A no-fault accident can lead to a 10% increase in your premium and remain on your record for up to three years.
However, some states do not allow insurance providers to increase premiums after a no-fault accident. However, filing a claim for such an accident will still count towards your total number of claims.
What to Do About It: Create An Auto Repair Fund
If the damage to your car is quite minor, you should consider paying for repairs out of pocket. This will prevent a potential premium hike due to extra claims filed. It helps to set up an auto repair fund to prepare for cases where you have to pay for car repair out of pocket.
Reason: Your Car
When setting premium rates, car insurance providers consider the type of car to be insured. Some types of cars are more likely than others to keep occupants protected in the case of an accident. This results in lower insurance rates.
However, drivers of high-powered cars such as sports cars are statistically more likely to drive recklessly. This makes these drivers more likely to cause accidents, resulting in higher insurance rates.
According to some studies, safer and bigger cars, such as small SUVs and minivans, tend to have the most reasonable rates of insurance. Smaller cars, on the other hand, have surprisingly high rates. One reason for this could be because they tend to sustain more extensive damage in a crash.
What to Do About It: Sell The Car
If you don’t want your car insurance premiums to be too high, you should consider selling it and purchasing a car that auto insurance providers consider safer. For instance, according to Motortrend.com, the cheapest cars to insure in 2021 include the 2021 Jeep Wrangler Sport, the 2021 Subaru Forrester, and the 2021 Mazda CX-5 Sport.
A muscle car, convertible, or luxury vehicle will most likely be more expensive to insure.
Reason: Where You Live
Car insurance costs vary widely across the United States. If you reside in Michigan, one of the most expensive states for auto insurance, you can expect to pay several times more than people living in Maine.
Various factors affect insurance rates in each state. These include the number of uninsured drivers, condition of the road network, minimum coverage amounts, and more. That said, you need to understand that insurance rates can vary within a state or city as well.
For example, if you live in an area with narrow roads that frequently lead to accidents, you may have to pay more for insurance than you would if you lived elsewhere. Those who live in areas with high rates of auto thefts tend to pay more for car insurance as well.
What to Do About It: Move
Moving to a new neighborhood, city, or state just to pay lower insurance premiums may not be the smartest move. However, if you are already considering relocating, you should get several quotes from insurance providers to understand how your premiums will differ.
Reason: Your Age or Gender
“Why is my car insurance so high?” This is a question many younger drivers tend to ask. According to the Insurance Information Institute, mature drivers tend to have fewer accidents than less experienced drivers, especially teenagers. This is the reason less experienced drivers pay more for car insurance.
Also, your insurer will charge you more if you let teenagers and young adults below 25 drive your car. If you have young drivers on your insurance policy, you may end up paying higher premiums.
Your gender may also affect how much you pay for car insurance. Statistically, men tend to get into more accidents and have more DUI-related accidents. Furthermore, they tend to have more serious accidents than women. These are the reasons why women tend to pay less for car insurance than men.
Young men are likely to pay a lot more for auto insurance. A 20-year-old man, for example, may have to pay about 16% more on his insurance premium than a woman of the same age.
However, as drivers age, the difference in rates tends to even out. Often, older women pay slightly more for car insurance than men of the same age. However, in this case, the difference in rates is quite small.
What to Do About It: Share a Policy
If you are a younger driver, you can reduce your car insurance costs by sharing a policy with an older member of your family. Doing so can lower your overall insurance cost by more than 50%. You may also apply for good student discounts or take additional driving courses to reduce your rates even more.
Reason: Your Insurance Company
Your car insurance may be expensive because your insurance provider charges higher rates. Rates vary dramatically among different insurance providers. Therefore, you could be paying significantly more than necessary.
According to one study, among the top ten auto insurance providers nationwide, the average price of basic coverage for a good driver is about $440 for six months. However, that same driver could be paying just $309 from one company or as much as $625 from another of the top companies.
Therefore, if you have a good driving record, you could save up to 51% in insurance savings by switching companies.
What to Do About It: Shop Around
The only way to find the most affordable car insurance is to shop around and do research on multiple insurance companies in your area. Make sure to collect as many quotes as you can so you can effectively compare these rates.
Reason: Your Driving Patterns
To put it simply, you and your insurance provider are at higher risk the more often you are on the road and the further you drive. If your travel great distances to and from work, driving your car may eliminate some of the inconvenience. You just listen to your favorite music or podcasts to pass the time as you drive to work every day.
However, you may be paying a higher insurance premium for that convenience. When you apply for insurance coverage, your insurance provider will want to know where you work and where you live. This will help them have a better idea of how far you drive regularly.
What to Do About It: Drive Less
If you use your car to commute to and from work every day, your insurance provider will want to know the number of miles you drive your insured car. If you drive 20 miles a day, you will pay more for insurance than someone who drives only two miles a day.
Therefore, to reduce your insurance premiums, try using your car less. Remember that you need to significantly decrease your car’s mileage by a lot before getting a discount on your insurance rates. Ask your provider about different mileage thresholds to get the most out of your efforts.
Reason: You Have Low Deductibles
When buying car insurance, car owners typically choose a deductible. This is the amount they would need to pay before the insurance provider picks up the tab in the event of theft, an accident, or any other type of vehicle damage.
Depending on the type of policy you choose, your deductibles may range from $250 to $1,000. However, there is a catch. Generally, the lower your deductibles are, the higher your annual insurance premium is.
What to Do About It: Increase Your Deductable
If you think you are paying too much for insurance, consider increasing your deductibles. You can ask your insurance agent how increasing your deductibles may affect your premiums.
Typically, doing so may lower your annual premium by several percentage points, which will help you save some money. If you choose not to file smaller claims to avoid pushing up your annual premium, increasing your deductibles may be a particularly smart move.
Reason: You Pay for Coverage You Don’t Need
If you think your car insurance is too costly, you need to take a closer look at your policy. Do you need to pay for things such as car rental coverage and roadside assistance? Although such coverage can provide some convenience, they are not the most important things to pay for.
What to Do About It: Remove the Unnecessary
Go over your insurance policy line by line and ask your provider about removing anything you do not need. If you pay for roadside assistance, for example, you should check with your credit card company to determine whether it offers the same benefit to cardholders. If it does, you can drop this service from your car insurance policy.
Reason: You Have Gaps in Your Car Insurance
Many auto insurance companies consider the continuity of a car owner’s auto insurance. If you’ve had lapses or gaps in your car insurance history, you may be pegged as a high-risk car owner. As a result, your premium rates may increase by as much as 8% per year. The rate increase goes up to 35% if the coverage lapse extends beyond 30 days.
These penalties may also vary depending on your auto insurance provider. Make sure you ask your provider about how an insurance lapse would affect your premium rates.
What to Do About It: Avoid Lapses In The Future
It’s in your best interest to keep paying for your car’s insurance policy so it doesn’t lapse. However, if this is not a feasible option, you can ask your insurance provider about suspending auto insurance on a car that’s out of use. This way, you can avoid having insurance lapses on your record.
The Bottom Line
To find out why your insurance rates seem to be expensive, you must first understand how auto insurance companies determine your rates. Fortunately, in most cases, you can do something about your unnecessarily high car insurance premiums. This may involve adjusting your driving habits or filing fewer claims, if possible.
In addition to shopping around for the best auto insurance rates and the right policy, you should look for discounts as well. These discounts may be applicable to drivers with good records, student drivers, and members of the military. Check your provider’s website to determine the types of discounts they offer.
The more information you have, the easier you will be able to identify the factors contributing to your car’s high insurance rates.