Why is Car Insurance so Expensive?

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Written by Serise Lange Edited by Quiana Darden Reviewed by Amanda Clear

Updated November 15, 2022

Whether you’re driving a 10 year old car or one that’s brand spanking new off the lot, you need car insurance. Not only is it required in all but 2 states, if you have a lease or loan, your lender or lessor will require you maintain a certain amount of coverage. 

While you know you need coverage, it’s easy to try to get around it because car insurance can be expensive! So, just why does car insurance cost so much? Well, there’s a lot that goes into calculating premiums. Let’s explore that now.

Factors that Make Your Car Insurance Expensive 

Let’s start with the many factors that go into determining how much you’ll pay for car insurance. When you begin a car insurance quote, you enter the auto insurance underwriting process. Underwriters working within car insurance companies look at your complete profile as a driver, including the following factors: 

• Your age
• Your marital status
• Your credit score
• The year, make, and model of your vehicle
• Your location
• Your driving history
• Your claims history

Of course, it doesn’t just stop there. In addition to all of the factors mentioned above, the quotes you receive can be costly based on additional information such as:

• How long you’ve had continuous car insurance coverage
• The coverages that you want as part of your insurance policy
• The deductible that you wish to pay
• Additional features, like being able to reduce your deductible over time

As you can see, more than you might expect goes into car insurance rates and why car insurance can be. Understanding what’s involved in auto insurance premiums goes a long way toward figuring out how to save money. 

Ways to Save Money on Your Car Insurance

Saving money on car insurance is critical to maintaining consistent car insurance coverage. Whether trying to bring down your rates because you’re about to add a young driver to your policy or trying to save as much money as possible as a solo driver, it’s never the wrong time to reduce your monthly premiums. 

Here are a few ways to reduce how much you pay for your car insurance: 

• Keep a Clean Driving Record: Your driving record plays a major part in how much you pay for insurance. So, keeping your record clean can help you save. Try to avoid traffic violations, speeding tickets and accidents as much as possible. 
• Take Advantage of Discounts: Most car insurance companies offer a slew of discount opportunities such as a multi-car discount, good student discount or pay-in-full discount. 
• Enroll in Telematics: Consider letting your insurance company use an app or a physical monitoring device to study how you drive and adjust your rates accordingly. Good drivers can save a lot on their monthly premiums this way. 
• Increase Your Deductible: A higher deductible equates to lower monthly premiums. This small change can save you big time. It’s always a good idea to have your deductible set aside in a savings account in case you need to file a claim. 
• Shop Around for Insurance: Shopping around at least quarterly for a better deal on insurance is an excellent way to ensure you take advantage of every chance to save on car insurance premiums. 

The Importance of Comparing Car Insurance Rates

With so many different options, it can feel overwhelming to consider other companies.  Sometimes it’s tempting to either stay with your current policy or select the first company with a big name. But insurance quotes vary dramatically between auto insurers, so it is worth comparing car insurance rates before settling on a new policy. 

In the case of sticking with your current policy, your renewal letter may cause you to make the switch. Did you know your rate can increase even if you haven’t had any accidents or claims? If you don’t shop around for the best rates, you’re like paying extra for no reason. 

At Compare.com, we help people sift through all of their options with an easy-to-use auto insurance comparison tool that allows us to get rates from 65+ insurance companies and present you with the most affordable options. That way you’re clear about how to pay less without sacrificing quality coverage.  

Choosing Car Insurance Coverages Carefully

What does it mean to pick the right car insurance policy? The right policy balances the coverages you need with a price you can afford. This means it’s time to look at the coverage in greater detail. 

Car insurance can be expensive based on the coverage selected. 

Generally speaking, the more you expect the insurance company to pay for repairs, the more expensive the insurance will be. For example, a collision coverage policy will be more costly than a bare-bones liability insurance plan. Liability insurance only covers damages for the other people involved in an accident with you when it’s your fault. You must have liability coverage, but collisions and comprehensive coverages are optional in most states unless you have financing on your car.

So, when you think about saving on your insurance, be sure to think about how much coverage you really need for your vehicle. 

Do Other Drivers Make Car Insurance More Expensive?

Unfortunately, there are only so many factors under your control when saving money on car insurance. This is because other drivers can also make car insurance much more expensive for everyone else. This is often state-specific. 

Take Texas, for example. It is a state that has higher insurance rates compared to other states because of the other drivers on the road. Not only does Texas have a higher than average rate of hit-and-run car accidents, but it also has one of the highest percentages of uninsured motorists in the country. Even if you’re doing everything you can to save money on car insurance, the fact that uninsured drivers aren’t sharing in the overall costs of insurance means higher rates for everyone. 

Drivers must get and keep insurance for everyone to benefit from lower rates. Unfortunately, people feel their insurance will be too high due to prior accidents or other traffic violations, so they prefer to fly under the radar.

Even though it’s illegal to operate a vehicle without insurance, the number of uninsured motorists on the road continues to be a problem.

Even Insured Drivers Create Higher Rates in Some Areas

Setting the subject of uninsured motorists aside, insured drivers on the road can also behave in ways that create higher rates for everyone. For example, if you’re in an area with a high accident rate, that will drive up the total cost of insurance for everyone. This is also the case if there are a lot of thefts in the local area because a high crime rate leads to more expensive premiums. 

Your car insurance quote is also based on the zip code where the car is parked (also referred to as the garage location). That’s why ensuring you always use the most up-to-date information is essential. 

If you’re in an accident and the insurance company discovers your address is outdated, your insurance company could deny your claim. Alternatively, they could raise your rates when it’s time to renew. Because of location, rural areas have fewer people, fewer accidents, and lower medical bills. This typically means that someone living in the countryside will pay less for their premiums compared to someone living in an urban area with a higher concentration of people.

A Different Way to Look at Car Insurance

Instead of looking at car insurance as a necessary evil, it’s time to look at the world of auto insurance for what it is – a chance to get protection against virtually unlimited claims against you. For example, suppose someone tries to file a claim against you seeking damages. In that case, your insurance company will investigate that claim thoroughly. Depending on the severity, there could even be legal action resulting from a fraudulent claim issue. 

Having an insurance company take care of any claims provides peace of mind and allows you to use resources you don’t have to maintain. You don’t have to pay an attorney if you’re sued due to an insurance claim. The insurance company will mount a legal defense per the terms of your contract. Even a high-risk driver has protection within an insurance policy; insurance providers strive to give everyone the service and contractual protection they deserve.

Making sure you compare insurance rates before settling on a policy is essential to getting insurance that fits your budget. At Compare.com, you can compare rates from 65+ companies before deciding. 

With it being that easy, you can shop around from the comfort of your own home without worrying about paying more than you need to to get the coverage you deserve.

FAQs About Why Car Insurance is Expensive

Why do I pay so much for car insurance?

There are many factors that impact your auto insurance rate including your driving record, age, vehicle make and model, your city and more. Some of these factors may be why you pay so much for car insurance or it could simply be the car insurance company you’re insured through. That’s why it’s always a good idea to compare car insurance rates to find the most affordable coverage.

How can you lower your car insurance?

You can lower your car insurance premium by doing various things. Some options include enrolling in discount programs and comparing car insurance rates to find the cheapest premium available. You might also consider increasing your deductible which will lower your premium. 

Does car insurance ever get cheaper?

Typically, your car insurance rate will decrease after you turn 25 years old. Other than that, your rate will likely only decrease for a certain reason such as if a ticket falls off of your driving record or your credit score improves. Other than that, you’ll need to be proactive about securing more affordable auto insurance. 

Serise Lange Auto Insurance Writer

Serise Lange is a freelance writer focused on insurance, finance, crypto, and helping people make sense of the intersection between money, progress, and power. When she isn't using her time as an auto insurance claims adjuster to educate the public, she's exploring the best of the American Midwest and beyond.