Here are five reasons your car insurance rate might seem high right now and what you can do about it.
Car insurance rates are on the rise. In July, the cost of car insurance rose 18.6% compared to a year ago, according to data from the U.S. Bureau of Labor Statistics.
More than half of Americans said they’ve noticed an increase in their own car insurance rate in the past year. If you’re like them, you’re probably wondering: “Why is my car insurance so high?”
Unfortunately, there’s no single answer. Many factors influence the price you pay for auto insurance. Some might seem obvious, like having a recent speeding ticket on record. But others may be less apparent, like your marital status or ZIP code.
Here’s how different traffic violations can impact rates. The rates below are for 35-year-old drivers with good credit and full-coverage insurance.
There are five main reasons your car insurance might be expensive:
- Your personal characteristics.
- How you drive.
- Your vehicle.
- Your insurance choices.
- Economic factors.
1. Your personal characteristics
Age: Young, inexperienced drivers are more likely than older drivers to get in a fatal accident. As a result, insurance companies generally charge higher rates for drivers in their 20s.
Gender: In most states, insurers can charge different rates for male and female drivers. This often means young men are charged higher rates than young women. The price gap between men and women decreases dramatically by age 30, although it never disappears entirely.
Marital status: Most large auto insurance companies have lower rates for married drivers than for those who are single, separated, divorced, or widowed.
Education: Drivers with college degrees generally pay less for car insurance. Insurers say highly educated people tend to file fewer claims.
Address: Location is one of the primary factors affecting your car insurance rates. Rates also vary significantly by ZIP code and neighborhood. For instance, rural drivers pay less than those in cities.
Occupation: Drivers with certain occupations pay higher rates because they’re more likely to file insurance claims. Some states have banned the use of occupation in setting rates.
Credit history: In many states, insurance companies use credit-based insurance scores to set prices. On average, a 35-year-old good driver with poor credit pays 58% more for full-coverage car insurance.
Home ownership: Some companies give homeowners a price break on car insurance, even if they don’t buy homeowners coverage through the same insurer.
2. How you drive
Driving record: If you’ve had accidents, tickets, or violations like a DUI, you’ll pay more for car insurance than a driver with a clean record.
Mileage: Low-mileage drivers often get cheaper car insurance, because less time on the road means fewer opportunities for an accident.
Car storage: Keeping your car in a garage is less risky than parking it on the street, and your insurance rates may reflect this.
Years of driving experience: If you started driving later in life, you’ll pay more for insurance than someone with more experience.
3. Your vehicle
Car make and model: Your rates are based on the claims your insurer has seen from other people who drive the same car model.
Trim level: Vehicles with extra features like lane sensors or high-end audio can cost more to repair — and therefore more to insure — than base models.
Safety features: Vehicles with good safety equipment often qualify for discounts, but high-tech safety equipment can be expensive to repair.
4. Your car insurance choices
Insurance company: The insurance company you choose can have a big impact on your rate, and prices can vary between states.
Insurance lapses: Gaps in insurance coverage can make you seem like a higher risk, and companies may raise your rates as a result.
Coverage selected: The more coverage you get, the higher your rate will be. Full-coverage insurance typically costs significantly more than minimum coverage.
Deductible amount: Your deductible affects how much you pay out of pocket before your insurer steps in. A higher deductible means lower premiums.
Loyalty: Some insurers raise rates for long-term customers, a practice called price optimization, while others may offer loyalty discounts.
Discounts: You may save money through discounts like good student discounts or bundling policies. Review these with your agent regularly.
5. Economic factors
Rising costs: Inflation and the increasing cost of cars and repairs mean insurance companies need to raise rates to cover their expenses.
Increase in claims: More frequent claims and higher payouts are driving up insurance costs for everyone.
How to save on car insurance
- Compare quotes from multiple insurers.
- Ask for discounts.
- Take advantage of major life changes.
- Raise your deductible.
- Revisit quotes after your driving record improves.
- Reconsider the car you drive.
