If it’s come time to renew your auto insurance policy and seeing a higher premium is giving you sticker shock, you may be asking: Why is car insurance so expensive? The cost of car insurance fluctuates due to industry factors, but it’s also influenced by information about the policyholder, the vehicle that’s insured, and other variables.
In this article, we’ll examine what shapes car insurance rates and how you can get a better price. If you want to find cheaper car insurance, the best way to do so is to compare rates from some of the best car insurance companies. Use the tool below to get free quotes for low-cost auto insurance from top providers in your area.
In this article:
- Why Is Car Insurance So Expensive?
- Tips For Getting Cheaper Car Insurance
- Our Recommendations For Car Insurance
- Frequently Asked Questions
Why Is Car Insurance So Expensive?
The price you pay for coverage, known as a car insurance premium, can fluctuate for several reasons. An insurer will reassess your policy when it’s time to renew and may give you a higher rate based on your driving habits, if you had to file a claim, or an external factor like an uptick in local crime.
Keep in mind it’s not always one single thing that can cause the price of a car insurance premium to shift. Below, we describe the industry- and personal-related factors that may play into why car insurance is so expensive for you.
If it seems like your personal car insurance premiums have been increasing, you’re probably not the only one that feels that way. The price of insurance coverage has been going up nationwide for years.
According to data from the National Association of Insurance Commissioners (NAIC), the average cost of car insurance rose by five percent between 2017 and 2018, from roughly $1,006 per year to approximately $1,056. This is in line with a trend of rising auto insurance premiums the NAIC has tracked over the past decade:
|Year||Average Auto Insurance Premiums|
There’s not much individual drivers can do about these rising costs. They take into account annual inflation as well as things like how much the industry had to pay out in claims the previous year. If there are more claims filed than usual in a particular year, insurers will make up for it by charging higher prices in the future.
Personal factors are more likely to be under the policyholder’s control. While you can’t change your age or driving history, you can work to improve your credit score or look into your payment options. These are all things an insurance provider will consider when determining an insurance rate. Providers look at data from your respective demographic to evaluate the overall risk of a customer.
Here are a few personal factors that may contribute to why car insurance is so expensive for you:
- Gender: Men are statistically more likely to be in an accident than women, so they tend to pay more for coverage.
- Age: Young drivers under the age of 25 are likely to pay a higher cost because they have less experience behind the wheel and are more prone to causing accidents.
- Marital status: Surprisingly, married couples in most states tend to pay less for coverage. Couples who have tied the knot usually file fewer insurance claims than drivers who are single, widowed, or divorced.
- How you pay: Insurance policies are generally sold in six- or twelve-month terms, and customers can pay upfront or monthly. Many insurers give discounts for paying all at once, plus your monthly payments could be subject to online fees, increasing your bill.
- Where you live: The state you live in determines how much insurance coverage you’re required to purchase. Also, living in high-traffic areas and places with high crime rates can cause your insurance costs to go up.
- Credit score: Insurance providers in most states use credit history as a metric to see how likely a customer is to miss payments or file a claim. Having no or bad credit can lead to a higher annual premium.
- Type of car: Cars may be considered greater risks if they cost more to repair or are more likely to be stolen. You’ll also usually see a higher rate if you own something like a luxury car, as the insurer will have to pay out more money if it’s damaged.
- Your driving record: A bad driving record will cause your premium to rise. If you have past at-fault accidents, DUIs, or speeding tickets, your insurance cost will go up and is likely to stay high until these things fall off your record (typically three years).
- Your claims history: If you file a claim during your policy period, you will likely see a hike in rates when you renew your policy.
Tips For Getting Cheaper Car Insurance
Now that you know why car insurance is so expensive, here’s the good news: It doesn’t have to be. There are several ways to save money if your policy has become too expensive. Below, we've listed a few things you can do to get more affordable car insurance rates.
1. Drop Unnecessary Coverage
Dropping coverage you don’t need or don’t use is one way to pay less for car insurance. If you have full coverage auto insurance on a car that’s valued under $4,000, you can likely downgrade to just liability car insurance. You may also want to lower your policy limits, but if you do this, make sure you can afford to cover damages on your own after an accident.
2. Look For Bundles And Discounts
If you’re a student with good grades, have been accident-free for a number of years, or have anti-theft devices on your vehicle, you might qualify for a discount. Insurance providers offer policyholders rewards for being a good student, taking safe driver courses, insuring multiple vehicles, and more. Some also offer discounts on car insurance for veterans and government employees.
Bundling your auto coverage with things like homeowners or renters insurance also might lower your overall price, as will having multiple family members on a policy. Younger drivers are great candidates for this, as a student might find a better rate by being on a parent’s policy. Ask an insurance agent what discounts you qualify for when it’s time to renew your auto insurance.
3. Opt For A Higher Deductible
Changing up your deductible is another way to a lower premium. Your deductible is the out-of-pocket expense you pay before your insurance pays out during the claims process. While a low deductible means you’ll pay less when you file a claim, raising your deductible can save you money if you have the financial means to cover unexpected bills. Keep in mind you’ll also get a smaller payout on your vehicle if it’s totaled and you have a high car insurance deductible.
Our Recommendations For Car Insurance
Comparing insurance providers is a great way to find the best rate on auto insurance coverage. Our team of insurance specialists has reviewed the country's top insurers and found that USAA and Geico are two excellent options due to their competitive prices. Read on to learn more about them, or enter your zip code below to start comparing free quotes from providers in your area.
USAA: Best For Military
If you’re a veteran of the United States military or have a family member with an existing USAA account, USAA is a great choice for insurance coverage. Customers can save 15 percent on their policies if they have a military history, 10 percent for bundling policies, and additional savings for staying with the company for several years. You can learn more about the insurer’s coverage options in our USAA auto insurance review.
Geico: Best Overall
With a famous slogan that claims it can save you 15 percent on car insurance, Geico is known for being able to offer great rates and great service. The Better Business Bureau (BBB) rates Geico an A+, and many customers have written rave reviews about the insurer online. With coverage available in all 50 states, discounts for good driving and taking steps to protect your vehicle, and add-ons like mechanical breakdown insurance, we chose Geico as the Best Overall insurer of 2021. Read our Geico auto insurance review to get more information.
In an effort to provide accurate and unbiased information to consumers, our expert review team collects data from dozens of auto insurance providers to formulate rankings of the best insurers. Companies receive a score in each of the following categories, as well as an overall weighted score out of 5.0 stars.
- Industry Standing: Insurers with strong financial ratings and customer-first business practices receive the highest scores in this category.
- Availability: We consider availability by state as well as exclusions for specific groups of drivers.
- Coverage: This rating is based on types of insurance available, maximum coverage limits, and add-on policies.
- Cost and Discounts: Our research team reviews sample quotes for a variety of drivers in every state. Companies with lower prices and many car insurance discount opportunities receive the best scores.
- Customer Service: We comb through customer reviews and consumer feedback studies from experts like J.D. Power.
- Technology: Auto insurers with mobile apps, advanced online services and telematics are more likely to meet consumer needs.