Why Is My Car Insurance So High? Learn Why Rates Are Increasing
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Like many Americans, you’ve probably wondered, “Why is my car insurance so high?” Many drivers are paying higher rates, and inflation is just one explanation for why car insurance costs more.
Unfortunately, car insurance policy rates will continue to increase. Below, we’ll explain why you’re seeing rate increases, which factors may affect you, and how you can save money on your insurance premiums.
- Car insurance rates and vehicle repair and maintenance costs are up by 18% and 13%, respectively, since 2022.
- Filing a claim, buying a new vehicle, moving to a new state, and adding a driver to your policy can affect the cost of your car insurance premium.
- Shopping around, bundling policies, applying discounts, changing deductibles, and improving your credit scores are ways you can get cheaper auto insurance.
Why Auto Insurance Rates Are Increasing Nationwide
Car insurance rate hikes are happening industrywide across the country. Premiums have risen by almost 18% since July 2022, according to the U.S. Bureau of Labor Statistics. The same Consumer Price Index (CPI) report also shows substantial increases in vehicle maintenance and repair costs, averaging nearly 13% more than last year.
We’re also seeing double-digit increases in the prices of new and used cars. Auto insurance companies aren’t faring any better, with staggering losses not seen in more than 20 years, according to S&P Global’s May 2023 report.
All of these factors contribute to continuously rising auto insurance premiums. Plus, insurance rates also go up when the cost of everything car insurers pay for increases — like replacement parts, body shop labor, and vehicle values, to name a few.
7 Reasons Why Your Car Insurance Is So Expensive
Understanding why your insurance is so expensive might ease your frustration when you open your next car insurance bill. Here are seven potential reasons why you’re seeing higher premiums.
1. Your insurance company
Rates can vary by insurance company. You can get the exact quote from multiple companies, and one may be substantially cheaper or more expensive. Insurance companies use their own algorithms to determine your cost of car insurance, with different weights for each factor.
For example, one company might consider a speeding ticket a minor offense, while another classifies it as a major offense, causing your rates with the first insurer to be cheaper.
We compared average rates for the largest and most well-known companies in the table below to show you just how much rates can vary from one company to the next.
|Insurance Company||Average Quote|
Allstate is about 55% more expensive than GEICO for the same driver profile and coverage levels. State Farm is 30% cheaper than Nationwide.
As you can see, comparing car insurance quotes from multiple companies can significantly affect how much you pay.
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2. Your driving record
Insurance is all about risk. Drivers at a higher risk of filing an insurance claim or making risky driving decisions pay more. So, if you’re a high-risk driver — meaning you have at least one traffic violation, at-fault accident, or DUI in your driving history — you’ll pay higher premiums.
You can expect to pay higher rates for one to five years after a ticket or accident, depending on your state and the type of violation. The following table shows average premiums before and after a violation on your driving record.
|Driving History||Average Premium|
You’ll get the lowest price on car insurance if you have a clean driving record. Your rates can increase by almost 33% after a speeding ticket and 98% if you get a DUI, according to Compare.com data.
3. Your coverage levels
The type and level of coverage you choose also affect your car insurance rates. Although liability-only coverage is cheaper than full coverage, you could risk financial devastation — especially if you only have state-minimum liability coverage.
In most states, if the injuries or property damage you cause in an accident are more than your coverage limits, the other driver can sue you for the rest.
That’s why most insurers encourage you to buy as much liability insurance as you can afford — or at least enough to cover your assets. Full coverage also provides physical damage coverage for your vehicle, which can repair or replace your car regardless of who’s at fault.
4. Your credit history
Most insurers use credit history to determine car insurance costs because it predicts your chances of filling a claim and paying your premiums on time, according to the Insurance Information Institute (Triple-I).
Your credit score isn’t a factor in all states, though. California, Hawaii, Massachusetts, and Michigan ban the usage of credit scores as a rating factor.
In the table below, let’s examine how your credit tier may affect your auto rates.
|Credit Tiers||Average Premium|
Drivers with excellent credit get lower rates, averaging $109 per month, according to Compare.com data. With average credit, you’ll pay around 30% more. But with poor credit, your average rate would be 164% higher than with excellent credit.
5. Your vehicle
Some vehicles cost more to insure. When determining your auto insurance costs, insurance companies consider your vehicle’s year, make, model, and trim level. Factors like repair costs, safety features, theft rates, and the initial MSRP of the car affect your premium.
We found vans, SUVs, station wagons, and pickup trucks are the cheapest body styles to insure. Convertible and coupe sports cars are the most expensive. Subaru, Buick, GMC, and Mazda are among the most affordable brands if you’re in the market for a new or used vehicle.
6. Your age and gender
More than 70% of auto accident deaths were males, compared to 28% women, according to a 2021 study by the Insurance Institute for Highway Safety (IIHS).
The trend is similar for young drivers, with young men ages 16 to 19 twice as likely to die in a collision than young women. Lack of driving experience and risky driving behaviors also contribute to higher rates for teen drivers.
We compared the average premiums for different age groups in the table below.
|Teens (18 years old)||$397|
|Young adults (25 years old)||$155|
|Adults (40 years old)||$130|
|Retirees (65 years old)||$122|
Our data shows retirees pay 225% less, on average, than 18-year-olds. Young adults age 25 pay an average of 156% less than teen drivers.
So, if you’re under 25 (an experienced driver in your early 20s, for example) and practice good driving habits, you should be rewarded with much lower car insurance premiums.
7. Your location
Location factors like theft trends, weather patterns, ZIP code, local repair costs, and accident rates cause insurance prices to vary in different areas. With a higher population density, drivers in urban areas may also pay more than those living in rural areas.
In the following table, let’s look at the average cost of car insurance in each state.
Florida, New Jersey, New York, and Louisiana are the most expensive states for auto insurance, according to Compare.com data. New York is the highest, averaging $306 monthly.
Maine, Vermont, New Hampshire, Iowa, and South Dakota are the cheapest, with average monthly rates between $65 (Vermont) and $78 per month (New Hampshire).
Other Potential Reasons Why Your Car Insurance Rates Went Up
Besides the above factors, there could be other reasons you’re seeing higher car insurance rates. We’ll explore them below.
You recently filed a claim
Your rate could increase if you recently filed a claim — even under someone else’s insurance policy. A CLUE report provides information on any claim you’ve filed in the last seven years on an auto or property policy. Insurance companies use this data to determine initial and renewal premiums.
You bought a new car
As mentioned above, the type of car you own affects your insurance costs. The new (or used) vehicle you just bought could be a more expensive car to insure than your previous one. Lenders often require you to purchase additional insurance, such as collision and comprehensive coverage, when you finance a car.
You got a speeding ticket or DUI
Traffic violations like a speeding ticket or DUI on your driving record can also increase your insurance premium. The good news is it’s only temporary. The best way to prevent a future increase is to avoid violations and incidents.
You added a new driver to your policy
Adding a new driver — especially if they’re young or newly licensed — can also cause your rates to go up. The addition of a more experienced driver — particularly a good driver with a clean driving record — will affect your premium less than a young driver.
You moved to another state
The state you live in is an important factor in your insurance rating. Although moving may be out of your control, getting quotes before you move may be helpful so you can prepare for higher monthly payments.
Your marital status changed
If you just got married, you could be in luck. Married people typically pay less for car insurance than single or divorced people.
5 Ways to Get Cheaper Car Insurance
Regardless of why your insurance costs have risen, there are ways to get cheaper rates. Here are five ways to lower your cost of car insurance.
1. Shop around and compare rates
Shopping around is one of the best ways to get cheaper auto insurance. Since different companies offer different rates, getting at least three quotes can help you find the lowest price on insurance coverage.
We recommend shopping when your policy is up for renewal or when your driving status changes, like getting married or buying a car.
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2. Look for discounts
You can apply multiple discounts to your insurance policy if you qualify. Ask your insurer about discounts for driver type, driving history, vehicle safety, membership, and policy-related discounts. Most can be stacked together — and you can save from 5% to 40% with each discount.
3. Bundle your policies
Insurance bundling is another excellent way to save, whether you bundle your home and auto or car insurance with another policy to get a multi-policy discount. Insuring your policies with the same company can make filing claims and managing your policies easier, help identify coverage gaps, and simplify your billing.
Bundling discounts can be significant — Allstate offers up to 25% savings, while Farmers gives up to 36% off.
4. Change your deductibles
A deductible is the amount you pay toward covered expenses when filing a claim. A low deductible increases your premiums. A higher deductible lowers your premiums, but you take on more financial responsibility if you file a claim. Make sure you can afford the higher out-of-pocket cost if you raise your deductibles.
5. Improve your credit score
A low credit score can lead to more expensive insurance rates. Paying your bills on time and using credit cards responsibly (keeping your balance low and paying them in full each month, for example) can help raise your score and lower your insurance premium.
FAQs About Why Car Insurance Is Expensive
We’ve answered some of the most commonly asked questions about why car insurance is expensive to help you make informed choices.
Why is my car insurance suddenly so high?
Your car insurance could be suddenly high for a few different reasons. You may have gotten a ticket, caused an accident, lost a discount, or added a new driver. Contact your insurer for specific reasons why your premium increased suddenly.
Which car insurance companies offer the cheapest rates?
The car insurance companies offering the cheapest rates depend on factors like your age, driving record, credit history, and ZIP code. Comparing auto insurance quotes can help you find the company offering the lowest premiums for your unique situation.
Can I ask to lower my car insurance?
Yes. You can ask to lower your car insurance, but that doesn’t mean your rate will change. Asking your insurance agent to review your policy can identify any gaps in coverage. It may uncover ways to save on your insurance.
Will my car insurance go up automatically if I get into an accident?
It’s possible. Your car insurance may go up automatically after an accident, especially if you were at fault.
Insurers can increase your policy premium for an at-fault accident, which causes an average rate increase of 45%, according to Compare.com data. If you had accident forgiveness before the accident, it might prevent a rate increase.
Data scientists at Compare.com analyzed more than 50 million real-time auto insurance rates from more than 75 partner insurance providers in order to compile the quotes and statistics seen in this article. Compare.com’s auto insurance data includes coverage analysis and details on drivers’ vehicles, driving records, insurance histories, and demographic information. All of the quotes listed in this article have been gathered from a combination of real Compare.com quotes and external insurance rate data gathered in collaboration with Quadrant Information Services. Compare.com uses these observations to provide drivers with insight into how auto insurance companies determine their premiums.
- Consumer Financial Protection Bureau, “LexisNexis C.L.U.E. (Auto & Property Reports),” Accessed September 7, 2023.
- Insurance Information Institute. “Background on: Credit scoring.” Accessed September 7, 2023.
- Insurance Institute for Highway Safety, “Fatality Facts 2021 Makes and females,” Accessed September 7, 2023.
- S&P Global, “US private auto insurers report historically bad underwriting results in 2022.” Accessed September 7, 2023.
- U.S. Bureau of Labor Statistics, “Table 2. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by detailed expenditure category,” Accessed September 7, 2023.
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