Your car insurance could be high because you have a poor driving record, you’re a young or old driver, or you live in an area where natural disasters are common. If you choose high coverage limits or a car that’s expensive to insure, your insurance rate could also be relatively high.
The price of car insurance has become very expensive for everyone, as the average premium increased by 82% over the past decade and 20% in the past year alone. One reason is that insurance companies themselves are facing rising costs as cars are getting more expensive to repair and replace, which leads to higher premiums for car insurance customers.
Top Reasons Why Your Car Insurance Is So Expensive
- Poor Driving Record
- High-Risk Location
- Low Insurance Score
- Expensive-to-Insure Vehicle
- High Coverage Amount
- Not Enough Discounts
- Too Young or Too Old
- Rising Costs for Insurers
- High Inflation
1. Poor Driving Record
Your driving record is one of the most important factors in determining your car insurance premiums. If your record has accidents and driving violations and you have a history of claims, your rates will be high. For example, a driver with one at-fault accident on their driving record will pay $1,005 per year for minimum coverage compared to the $671 per year a driver with a clean driving record will pay. Keeping a clean driving record can help lower your insurance costs.
2. High-Risk Location
Where you live has a large impact on your premiums. Some areas of the country have much higher insurance costs than others. For instance, a driver in New York will pay $1,719 per year for minimum coverage while a driver in Iowa pays $294 per year. Insurance companies look at a number of factors including the history of accidents in the area, population density, the number of uninsured drivers, crime statistics, and bad weather patterns to determine your premium. Also, if you live far from work and have a long daily commute, the high annual mileage could raise your rate.
3. Low Insurance Score
Every major insurance company uses a credit-based insurance score to calculate premiums where allowed by law. Like credit scores, insurance scores are based on credit report information, but they are used to predict a driver’s likelihood of filing a claim. The rationale is that individuals who are careful with their money tend to be careful drivers, too.
However, insurance scores are controversial, so insurance companies are banned from using credit information to determine car insurance premiums in Massachusetts, Michigan, Hawaii, and California. Most other states also have restrictions on their use, which can be found on the state insurance regulator’s website.
4. Expensive-to-Insure Vehicle
The type of car you drive can affect your insurance rates. Insurance companies like safe, boring cars that nobody wants to steal for joyriding or parts. If you choose to drive something large, fast, luxurious, or popular with thieves, you will pay more.
5. High Coverage Amounts
High coverage limits and low deductibles mean the insurance company will have to pay out more when you make a claim. Since the insurance company risks having to pay out more in the future, you will have to pay more now for your insurance premium. Also, opting to get full coverage instead of your state’s minimum requirements means a high premium.
6. Too Few Discounts
Not taking advantage of all the discounts available from your insurance company can cost you. Insurers offer a wide variety of discounts that can save drivers up to 35% on their annual premium. Car insurance discounts offer savings for things like being a long-time customer, having multiple cars and policies, and paying online.
In addition, discounts may apply if you are a good driver, a good student, or a member of a certain profession or organization, for example. Your car may also qualify for a discount if it has equipment that makes it safer to drive or harder to steal. Discounts are available to nearly everyone, and you may qualify for some that you aren’t getting credit for yet.
7. Too Young or Too Old
Teens are statistically more likely to cause car accidents than the average driver, so insurance companies charge them the highest premiums. Teen drivers usually see their premiums decrease with every year of experience, however, and age 25 is generally considered a turning point when premiums become considerably lower. Experienced drivers in their 40s and 50s are often the cheapest to insure. But rates begin to rise again after age 65.
8. Rising Costs for Insurers
Record-setting natural disasters, high rates of insurance fraud, and expensive-to-repair car technology have all increased costs for insurance companies. As a result, insurers have been raising their prices to cover their expenses.
9. High Inflation
Inflation can cause car insurance rates to increase at a faster pace than the long-term trend. For example, the average cost of car insurance skyrocketed by more than 20% from December 2022 to December 2023. The rise in insurance costs has outpaced prices for other consumer goods and services.
Overall Cost Increases From 2022 to 2023
- Car Insurance: 20.3%
- Rent: 6.2%
- Hospital Services: 5.5%
- Food: 2.7%
*Source: U.S. Bureau of Statistics’ Consumer Price Index (December 2022 to December 2023)
You may not be able to counteract the effects of inflation entirely, but if you want to lower your own insurance costs, address as many of the factors that you can control as possible, such as your driving record, your credit, and the coverage amounts you choose. Then get quotes from multiple insurance companies and compare them to find the best deal.
To learn more, check out WalletHub’s complete guide on factors that affect car insurance rates. You can also check out more tips for lowering your car insurance below.
How to Get Cheaper Car Insurance
You do not need to suffer with sky high car insurance costs. There are things you can do to bring down your insurance rates.
Compare quotes: Insurers charge different rates for the same coverage. Try to compare quotes from at least three different insurance companies to see which will save you the most money.
Look for discounts: While you’re comparing car insurance quotes, make sure to factor in the discounts each company offers to get the lowest price possible.
Reduce your coverage: Dropping unnecessary coverage types, such as collision and comprehensive if you no longer need them, can lower your insurance premium. The same is true if you lower your policy limits, as well.
Raise your deductible: Increasing your deductible means you pay more out of pocket if you have to file a claim, but your insurance premium should cost less.
Improve your credit: Drivers with bad credit are more likely to file an insurance claim than drivers with good credit, so car insurance companies may charge you more if you have poor credit. Fortunately, WalletHub offers personalized credit advice to help you improve your credit.
Get an insurance-friendly car: Getting a car with safety features that reduce the chances of an accident can save you money on your insurance premium. Finding the right car takes time, but WalletHub did some of the research for you with our guide on the cheapest cars to insure.
To learn more, check out WalletHub’s complete guide on how to lower car insurance.
Cheapest Car Insurance Companies
Some insurance companies charge nearly three times as much as others for the same type of coverage. Doing your research can help you find the cheapest car insurance company for the coverage you need. The companies below are some of the least expensive options.
| Company | Average Premium |
|---|---|
| GEICO | $796 per year |
| USAA | $807 per year |
| Progressive | $1,033 per year |
| National General | $1,670 per year |
| Nationwide | $1,866 per year |
*Note: These rates are based on minimum coverage for drivers in California. Actual rates will vary.
To learn more, check out WalletHub’s guide on the cheapest car insurance companies.
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