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March 25, 2020

Why is Car Insurance so Expensive?

a car in one hand and dollar sign in the otherOn average, car insurance costs $1,457 a year in the U.S, which is about $121 a month. New drivers may think that car insurance is simply expensive no matter what, but this isn’t the case. There are many factors that go into calculating the cost of your car insurance. In general, insurance companies analyze the risk you pose. Insurance companies don’t want you to file a lot of claims, since it costs them money. That’s why they charge more for drivers who they believe are more likely to file claims.

So, who is more likely to file a car insurance claim?

On average, a male between the age of 16 and 25 is the most likely to file a car insurance claim. This is because teenagers are more likely to speed, and men are more likely to engage in aggressive driving. In 2016, drivers between 15 and 20 years old had the highest rate of speed-related crashes that resulted in fatalities. In 2016, it was discovered that males between 19 and 39 years old were more likely to drive aggressively.

Age and gender aren’t the only influences on your car insurance rates, however. Car insurance premiums also depend on your:

  • Location
  • Vehicle model, safety rating and value
  • Credit score
  • Driving record
  • Coverage limits

Where You Live

If you live in areas with a high cost of living, you’ll likely pay more for insurance. Michigan has the most expensive average at $2,611 a year.

Choose Your Vehicle Carefully

Some vehicles cost more to insure based on certain qualities. Expensive vehicles, sports cars and vehicles modified for speed will all cost more to insure. Vehicles with high safety ratings, on the other hand, typically cost less to insure. If you want to save money on car insurance, you may want to purchase an older vehicle with a high safety rating. There are also certain vehicles that are statistically more likely to be stolen, and thus cost more to insure.

Bad Credit Might Mean High Premiums

Credit scores are a way for the insurance company to see how reliable you will be in paying your bills in full and on time. Most teenage drivers don’t have any credit, which is one of the reasons teens are usually on their parents’ policy. Their parents’ car insurance premiums will go up significantly by adding a teenage driver to their policy. This makes it even more important for the insured to have good credit.

Wrecks Can Raise Your Rates

Your driving record is one of the most important considerations to your insurance premiums. One wreck raises insurance by 41% on average. This is less than the cost of a DUI, which is considerably more. Insurance can rise over 80% after an incident involving a DUI. Drivers with a bas or spotty driving record may have trouble finding insurance, let alone insurance that is affordable. Nevertheless, it’s possible to find insurance agencies that specialize in nonstandard drivers.

Coverage Limits

The more coverage you have, the more expensive your insurance will be. There are some coverages you must have as required by state law. In Texas, for example, you must carry:

  • $30,000 in bodily injury liability per person
  • $60,000 in bodily injury liability per accident
  • $25,000 in property damage liability

Depending on where you live, other coverages may be optional. If you have an older, worn car that would cost more to insure than to replace, you may not need full coverage. On the other hand, newer cars should be insured properly so you won’t be stuck paying expensive repair and liability expenses after an accident.

Categories: Blog

Tags: auto insurance

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