Why your car insurance is expensive
Most of the time, your insurance is high because companies think there’s a good chance that you’ll make a future claim. That’s why car insurance tends to be much higher for some types of drivers than others, even if they’ve never been in an accident or made a claim before.
Young drivers or drivers in big cities tend to pay a lot for car insurance, but shopping around and comparing rates from multiple companies can make it easy to find cheaper coverage. Here are some of the most common reasons for high car insurance rates:
1. Where you live
Your location, including your state, city, and even your ZIP code, plays a huge part in determining your insurance rates. In fact, when comparing rates for drivers in two different parts of New York City, we found that car insurance cost $2,859 more per year in one Brooklyn ZIP code than it did for the same driver in a Manhattan neighborhood.
Your rates may be higher if you live in an area where there’s a lot of crime — especially auto theft. Living in a big city with crowded roads, lots of traffic, and limited parking can all lead to higher insurance rates.
You can avoid expensive insurance in a high-cost city or state by shopping around for lower rates, and finding a secure place to park your vehicle when it’s not being used.
2. The age of the drivers on your policy
Insurance is more expensive for new drivers who haven’t had a license for very long. This usually affects households with teen drivers the most, but your car insurance can also be higher if you’re an adult who’s just gotten licensed.
3. The type of car you drive
If your insurance is too expensive, your car might be the culprit. Cars that have a lot of expensive technology lead to higher insurance rates, since they cost more to fix or replace.
For example, average annual car insurance rates for electric cars are hundreds of dollars higher per year than for gas-powered models because their parts can be more expensive to replace after an accident.
Consider insurance rates before you buy a car — remember that the more expensive the vehicle, the more it usually costs to insure.
4. Your driving record
Car insurance can be significantly higher for drivers who have a spotty driving record. Having one or more recent accidents, or a driving violation like a ticket or a DUI or DWI on your record can lead to insurance that’s much higher than average.
A speeding ticket generally raises your rates by an average of 44%. But an at-fault accidents will raise your rates by 55%, while a DUI will increase your insurance by an average of 114%.
If your car insurance is too expensive because of your driving record, you can still bring your rates down. Consider shopping around and switching policies if there’s a cheaper option available.
5. Your credit score
Insurance companies use your insurance score, which is partially based on your credit score, to set your rates. A lower credit score means higher insurance. We found that drivers with poor credit pay $1,389 more per year than a driver with good credit.
The best way to improve your credit score and bring down your car insurance rates is by continuing to pay outstanding debt, asking to raise your credit limits, and keeping your balances low on credit cards.
6. Your coverage levels
Your insurance may be high if you have a lot of coverage. It’s a good idea to have as much liability coverage as you can afford, but not every driver needs the highest limits available.
You may also be paying for endorsements you don’t need — car insurance companies offer add-ons like roadside assistance or new car replacement coverage, but they aren’t right for every driver.
And if you have an older car that you wouldn’t bother replacing if it were in an accident, you can save by dropping full coverage.
7. Changes in the insurance industry
Sometimes, your car insurance is high because of changes in the insurance industry that have nothing to do with you. Companies sometimes raise rates to make up for increased losses, like when workers started returning to work after the start of the COVID-19 pandemic. When more people started driving, accidents increased and insurance costs got higher.
The entire insurance industry might also be affected by rising repair costs, natural disasters, and other factors that raise rates for everyone. If your insurance gets too expensive, you can still find lower costs by shopping around.
8. Your choice of company
Rates can vary by car insurance company, even for the same driver. If your insurance is much higher than average for a driver like you, it could just be because of the way a company calculates premiums.
If your rates have been going up every year, it might be top to shop around for cheaper options. The best way to get lower insurance is by comparing quotes from multiple companies, so you can switch to the company with the cheapest rates.
How to save money when your insurance gets too expensive
There are a few easy ways to get cheaper insurance when your rates get too high. Even if you're a safe driver, insurance often goes up every year. Try these ways of bringing down costs when your car insurance gets too high:
The number one way to lower your rates once your insurance gets too high is by shopping around and comparing quotes. This way you avoid unintentionally paying more for coverage than you have to.
We found that the cost of insurance for the same driver can vary by an average of $221 per month depending on the company they choose.
Your insurance will get more expensive after a crash or a ticket, so driving safely is one of the best ways to keep your rates low.Some companies even offer extra safe driver discounts to drivers who go a few years without an accident.
If your insurance is expensive because you have an accident on your record, you can still bring down your rates (eventually) by driving safely going forward. Accidents will “fall off” your record after a few years and your rates will go down to normal.
Qualify for more discounts
Any discounts will be automatically applied to your insurance when you buy coverage, but you can always try to qualify for more if your rates are still too expensive.
Some of the most common ways to earn car insurance discounts include:
Completing a defensive driving course
Bundling your car insurance with another kind of policy
Installing simple anti-theft devices in your vehicle
Re-shopping for insurance ahead of your policy’s renewal date
Switch to usage-based or per-mile insurance
Another great way to lower your rates when your insurance gets too expensive is by switching to usage-based insurance or a per-mile policy. Unlike conventional car insurance policies, these policies base rates on your driving habits.
When you sign up for a usage-based insurance program like Snapshot or Smartride, your driving will be monitored for a few weeks. Then your rates will be adjusted based on how safely you drove. And the cost of per-mile insurance is based on how many miles per month you drive.