Why Is Your Car Insurance So Expensive?
Car insurance is a service many people take for granted. It's not something that you think about all too often, but when you do, it can get quite expensive. But why is your car insurance so expensive? What are the biggest reasons for the high price tag?
This article breaks down the main factors in determining how much car insurance costs and gives real world examples of what consumers should expect from their automobile coverage. It goes into detail about how insurers set premiums and why they may or may not be able to control rates in certain areas to cut costs for customers.
This is not a comparison of car insurance policies. This article is a discussion about how insurance companies and their subsidy, the state insurance department, determine what rates they can charge and the factors influencing those decisions. It's also about how the drivers we cover in those policies affect rates through risk factors such as driving records and claims histories – which may be hidden or unknown to us.
Why Is Car Insurance So Expensive?
The price you pay for your car insurance will depend on a number of factors, but here are some of the most significant ones. You can see some actual numbers in our table below:
It's important to note that there are many variables that play into an individual's auto insurance premium rate. To get a more accurate estimate, you should talk to a licensed insurance agent. Read on to learn how the above factors affect what you pay for your car insurance policy.
Alexandria, Virginia resident Bret Tankersley filed a lawsuit claiming that State Farm denied future claims and decided to not pay his claim without reason. He said his deductible was $250. [ QZ ]
In the lawsuit, he wrote: "My deductible is $250 per person for 6 months of coverage." According to ABC News , after being involved in an accident with a drunk driver, Tankersley was taken by ambulance from the scene to the hospital where he spent three days in recovery. State Farm only paid for the ambulance ride. Tankersley was also involved in an accident in 2013 where he was drowsy behind the wheel and hit a deer on the highway. He spent $4,479.95 of his own money to fix his vehicle. State Farm offered him $900 as reimbursement for damages to his car, but he declined their offer because it was too low.
Is Car Insurance Expensive in Your Area?
So why is car insurance so expensive wherever you go? It can be expensive in areas with no claims or high risk drivers because these are statistically more likely to get into accidents that can cause injuries or property damage that result in expensive payouts for insurers.
For example, a high number of claims can be caused by a high number of uninsured drivers on the road. Car insurance companies measure risk by determining premiums based on the likelihood that you'll be involved in an at-fault accident. It's like insuring a car that's more likely to get into collisions or get damaged. The higher your risk, the higher your premium will be.
It's not just where you are that can affect how much car insurance costs — it's also when. Insurance companies need to recoup payouts they've paid out for recent accidents and claims, so they may factor in how much money they've spent recently on claims and decide to raise rates across the board as a result.
If you have a clean driving record, you'll be charged less for your car insurance policy. If there have been recent accidents in your area, or if you live somewhere that is known to have a high traffic accident rate, you will likely pay more for auto insurance. Insurance companies also adjust rates based on other things like your make and model of vehicle and the amount of miles you drive annually.
How Do I Save Money on Car Insurance?
You can lower your rates by paying attention to the factors mentioned above. The best thing you can do to lower your car insurance payments is to maintain a good driving record, follow the law and drive safely. If you're not involved in any accidents, you'll be less of a risk to the insurer and will likely be charged less for your car insurance policy.
You can also shop around. Rates can vary widely from company to company, even when the policies have similar coverage amounts. Shifting your auto insurance coverage from one provider to another could save you quite a bit over time. Talk with several companies about their rates, coverages and payment options before deciding on which policy is right for you.
How Does Your Driving Record Affect Car Insurance Rates?
In general, the longer you've had a clean driving record, the lower your rates will be. However, this isn't always the case: some insurance companies use your driving history as a percentage of the overall risk to determine your premium. If you have a high number of tickets or accidents on your record, you'll likely pay more for your car insurance policy than if you had a clean driving record in that regard.
If you're under 25 years old and get into an accident with an uninsured driver or have multiple tickets within a three year period, this can also affect what you pay for car insurance.
Can I Lower My Rates by Getting a Car that's Safer or More Expensive?
You can't really guarantee that you'll get lower rates for your car insurance. It depends on a number of factors, some of which are outside your control. However, there are some features that may be more expensive or more dangerous to have than others, especially if they increase the risk of an accident for you. Consider the following:
Car seats: these aren't required in all states but they're usually recommended as they help keep you safe when your car is moving. You will need to pay extra for them if the manufacturer makes them mandatory in car seats made after the year 2000 that are designed for children under age five. Getting car seats with an appropriate weight rating will help you get a lower rate for your car insurance.
Collision Damage Coverage: this is usually included in your auto insurance policy and pays for damage to your vehicle that occurs as a result of an accident. The higher the coverage amount, the lower the premium you'll pay for car insurance.
How Does Speeding Affect My Car Insurance Rates?
The number of miles you drive can affect how much you pay in premiums and how fast your rates will climb if you're speeding. Most states consider a certain number of miles driven per year (usually 12,000-15,000) to be part of each year's driving record when calculated against each person's risk profile.
Driving more than the annual average in any year during your driving record can increase your premiums. Driving fewer miles can help you get a lower car insurance rate. However, it's always better to maintain a good driving record than trying to lower your rate by speeding or increasing the number of miles driven annually.
Also remember that if you commit violations such as speeding and running red lights, that will affect your driving history and could result in higher rates for you. Some states have laws that help penalize convicted speeders by assessing extra fees on their auto insurance policies. For example, California assesses $220 in additional fees against a licensed driver who accumulates 12 or more points under the state's point system within one year.
Conclusion
How much you pay for auto insurance is partially a matter of how much risk you are to the insurer. If you pay attention to your driving record and other factors like your location, age and the type of vehicle you drive, you can lower what you pay for car insurance. By following all local laws, maintaining a good driving record and being prepared if an accident happens (i.e., having adequate auto insurance policies), you can benefit from lower costs over time.