Why Is Car Insurance So Expensive?
Top 3 reasons that are driving your car insurance prices up, and a few tips to help them back down.
Figuring out car insurance can get tricky, really fast if you aren’t paying attention. One of the most common questions I get from people when we are trying to make sense of their insurance needs is “Why is car insurance so expensive?” And it's regularly accompanied by a few examples of quotes they’ve received in the past, compared with the lower prices some of their family and friends have gotten. Sometimes even from the same company.
The first thing you need to understand when we are talking about insurance (car or otherwise) is that there isn’t necessarily a “standard” in the market.
Each policy or quote follows some general metrics depending on the coverages you are after, but the pricing is, by and large, tailored to your specific circumstances. Things like your financial track record, lifestyle and practices, past insurance experiences, etc., regularly leadto vastly different pricing on even very similar coverages offered to entirely different people.
That being said, there are a handful of general circumstances or points of comparison that we know are responsible for higher car insurance rates. Some you can’t actually do anything about, but for others, there’s at least some benefit on being aware or can actively be used to get lower rates from insurance companies.
So, if you are currently in the market to insure your vehicle and are wondering “Why is car insurance so expensive?” you’ll probably find some of the reasons below.
Most common reasons why your car insurance prices go up
Age is a leading factor factored in the way insurance companies price their policies. In the same manner that advanced age drives health insurance policies prices up, car insurance gets more expensive the younger the insured is. This is because insurers consider younger driver as lacking both experience and maturity on the road, thus becoming more prone to accidents and needing the coverage.
The more likely an insurer thinks you are to make use of the coverage, the more expensive the policy gets. There’s little to be done in this regard, since this “overpricing” for younger drivers will probably remain until the person turns 25, however, some companies do offer discounts when the young driver’s policy is attached to a parent’s policy.
Make, Model, and Usage
Another significant factor or set more accurately that can drastically influence the pricing of your car insurance. Most people just assume “Yeah, expensive car equal more expensive insurance” but it is a little more complicated than that.
Exotic and more expensive vehicles do indeed tend to get more costly insurance premiums, and it is tied to the machines value, but it also takes into account the attractiveness such cars present to burglars and car thieves. The higher the risk of it being stolen, and the higher costs of repairs will drive your policy up.
Also, if you drive long commutes on a daily basis (say, to and from work), it is viewed as more time spent exposed to suffering from accidents, thus driving your prices up.
This particular piece of information benefits you if you haven’t purchased that new car you are considering. Insurance pricing is a significant factor that conscientious buyers take into account when getting a new car, and it is impressive how much you can save in insurance by opting for a less exotic vehicle with excellent safety ratings.
People are often surprised when I bring this one up, failing to see the connection. The reality is that if you have a weak credit score rating, most insurance companies will only offer you high-risk auto insurance rate, regardless of your driving record.
You can be an experienced driver with a long track record of incident-free driving, and poor credit will still make you look like a higher risk to insurance companies.
If you are working on improving your record (or it has improved in the recent past), it might be a good time to shop around for some fresh insurance quotes, since you’ll most likely get a better deal than what you currently have.
There are plenty more reasons to answer the common question of “Why is car insurance so expensive?”, you have canceled policies in the past, low deductibles, even having received big payouts on past claims will affect your payments in some manner.
However, I’ve found that the three discussed here are the most telling, and they are overlooked by people more often than not.
If you are looking for some new car insurance quotes, make sure you take these into account and figure where there’s some wiggle room to find the best possible deal for your particular situation.