Why is my insurance so high? Like most costs, auto insurance rates tend to rise over time. Certain factors push premiums up even higher than the overall rate of inflation. Modern cars are more expensive to repair. Also, the cost of medical bills is also going up. These costs are passed on customers in the form of higher premiums. If the cost of your car insurance is high, it’s probably because you’re considered a “high-risk” driver.
Why is my insurance so high?
There are some factors which ordinarily would make your insurance to be high. These factors includes:
Young drivers always pay more for car insurance than old and experienced drivers. This is because they’re more likely to crash. Their high rates reflect that increased risk. However, experienced drivers will also face higher premiums because after the age of 69, the risk of accidents increases again.
However, there are ways for young drivers to get cheaper car insurance. They can:
- Add a parent to their policy
- Get a black box policy
- Get a fairer policy price
- Buy temporary car insurance
- Get a car from a cheaper insurance group
Where you live:
Your area of residence can have a surprisingly significant impact on your insurance premiums. Insurance companies generally use your ZIP Code to determine the risk level of your location. They look pretty carefully at driving stats in your location when you apply for insurance. They consider the:
- rates of vehicle theft that happen there;
- rate of vandalism that take place there;
- rate of crashes and hailstorms that occur there;
- rate of traffic congestion that happens there;
- how many uninsured drivers live there etc
Thus, if you live in a major city, your rates will likely be higher than if you live in a quiet rural area because cities are more prone to traffic accidents than small towns are. Likewise, if you live in a small town but commute into a big city, your rates will likely be somewhat higher than if you both lived and worked in a small town.
The safer your driving habits, the less likely you are to end up in an accident. Insurance companies weigh your driving history heavily when calculating your rates. Accidents, speeding tickets, DUI convictions, moving violations, and the like will attract higher rates. Points on your licence can be another factor. If you have plenty driving misadventures,it may be difficult finding an insurer who will cover you.
However, a driving record can improve over time. Most insurance companies will check for accidents on your record three years back, but no further than that. Drivers with a clean driving record and no at-fault accidents often save money and get lower rates. Also, they’re often eligible for “good driver” or “safe driver” discounts from insurance providers.
The type of car you drive.
Cars are categorized into different groups for insurance purposes. Your premium depends on what group your car falls into. Certain car and truck models have much higher claims rates than others. This may be because statistics show they get involved in more accidents or because they’re more likely to be stolen. Similarly, the more expensive your car, the more insurance companies would need to pay to replace it. Therefore the premium for such cars will definitely be higher.
Also, if your car has extra safety features such as an anti-theft system, you may be able to get a safety discount on your premiums. The age of your car doesn’t directly affect your rates. However, it goes hand-in-hand with a lot of the things that affect it. For instance, newer cars tend to have more safety features but they’re also more expensive to repair.
You’ll also pay more if your car is modified. So it’s always worth checking with your insurer before you make any major changes to your car. Even changing the color of your car may be counted as a modification.
Your previous insurance history
A lapse in your coverage can result in a significant increase to your premiums. Switching from one company to another doesn’t affect this factor. However, going without any coverage at all for even one day can have a significant impact on your auto insurance rates.
If you intend to go without a car for a while, you should consider getting a non-owner car insurance policy to avoid a lapse in coverage. Having such policy will also allow you to keep your driver’s license active during this period.
Your credit history
Drivers with a credit score under 600 are considered riskier by insurance companies. Therefore, they’are often be charged an inflated premium. California, Hawaii, and Massachusetts bar insurers from using credit scores. Therefore, if you happen to live in one of those states, you’re in luck. Building a history of making payments on time is the most effective thing you can do to improve your credit score.
Your coverage limit
Every state has minimum insurance requirements. The higher your coverage limits go above those minimums, the more expensive your insurance will get. Therefore, if you stick to your state minimum coverage requirements, you’ll get the best possible deal. However, for many drivers, it’s better to buy a somewhat higher level of coverage.
The deductible on your policy is the amount you have to pay towards a covered expense before the insurance company takes over. For instance, if you have a $300 collision deductible, you’d have to pay $300 worth of repairs, and your insurer would pay for the rest. Thus, the lower your deductible is, the higher premiums you’ll have to pay.
However, setting a very high deductible could mean that you won’t be able to pay the repair bills if an accident occurs. You just have to figure out how much you could comfortably afford to pay for repair bills and other fees, then set your deductible to that level.
How often you drive your car and where you drive it
Most insurance companies will look at mileage, too. Generally, the higher your annual mileage, the more you’ll pay. Also, when you apply for an insurance policy, you may be asked what you use the vehicle for. Getting your car covered for business or ride-sharing use will be more expensive than getting a personal-use-only policy. However, you shouldn’t lie to your insurer regarding what you use your car for. If they find out, they’ll likely void your policy. And if you get in an accident while ride-sharing and you haven’t told the company about your side business, they’ll most likely refuse to fill the claim—leaving you stuck with all the costs.
The Insurance Institute for Highway Safety reports that accidents involving male drivers are generally more severe than accidents involving female drivers, and men are more likely to die in an accident than women are. Consequently, insurance companies often charge men (especially young men) higher premiums than they do women.
The gender factor tends to improve with age. From their thirties through their fifties, men and women generally get roughly equal insurance premiums, all else being equal.
Your marital status
Studies have shown that married drivers have fewer auto insurance claims than single, divorced, or widowed drivers. Consequently, premiums tend to be lower for married couples.
You probably don’t want to change your marital status just to lower your premiums. However, if you do get married, you should inform your insurer right away. You may be able to get an immediate reduction in your insurance rates.
If you make a claim on your car and your insurer considers it unworthy of repair, they can “write it off”.
Write-offs are riskier to insure. Thus, if you buy a second-hand car that was once written off and has been repaired, you’ll probably pay a lot more for your insurance.
Your job title
Drivers in certain professions get higher premiums. This has nothing to do with driving for work, because most policies don’t cover driving for business purposes. It’s more about the historical data insurers have about how people in those professions drive. If your car insurance price is particularly high, you may be able to cut a bit off your insurance premium by carefully choosing how you describe your occupation. However, there’s a big difference between this and lying about your job, which would make your policy invalid.
Crashes with uninsured drivers
Many people drive without car insurance. This makes it more expensive for everyone else. When an insured driver crashes with an uninsured driver, someone has to pay out. And that someone is the underwriter of the insured driver. Because of this, premiums get higher for everyone. It had been said that uninsured drivers add £30 to the average policy.
Why your car insurance premium suddenly went up
Why is my Insurance so high? Sometimes it looks like your car insurance has gone up for no reason. Below is why that happens:
When you purchase car insurance, you pay Insurance Premium Tax (IPT) instead of value added tax (VAT). Just like VAT, IPT is set by the government. IPT keeps getting higher and higher. In 2011, it was 6%. And in 2017 and 2018, it was 12%. For some kinds of insurance, for instance, travel insurance, IPT is even higher, at 20%.
The Ogden discount rate
The Ogden discount rate aids insurers in working out how much compensation they have to pay for life-changing injuries. In 2017, the rate changed from 0.25% to -0.75%, meaning insurers have to pay out much more. But in 2019, it went back to up to -0.25%. Lower Ogden discount rates make car insurance premiums higher for everyone.
Misleading temporary discount rates
Some insurers offer very low premiums just to attract customers. Then they increase the cost next year hoping you won’t notice.
This simply means your car insurance premium will jump up occasionally anyway, even without all the other things listed above.
The good news is that there are things you can do to reduce your car insurance premiums. While you remain helpless regarding some of the factors that car insurance companies use to set your premiums, you can improve others with a little effort. The more factors you improve, the lower your premiums will go
Why is my Insurance so high? How to pay less for car insurance
Below are a few steps you can take to tip the above-listed factors in your favor and cut your car insurance rates.
- Assess car insurance discounts aggressively, both with your current insurer and other insurance companies. Certain discounts are universal. For instance, multi-policy discounts for having more than one type of insurance policy with a particular company. Others are relatively unique. Make inquiries with your insurance agent to ascertain which discounts they offer. Individual discounts tend to be reasonably small. However, if you can grab five or six of them, the savings can add up.
- Always shop around for auto insurance. When it’s time to renew your policy, get quotes from other insurers before you sign on with your current provider. Don’t assume that because your insurer was the cheapest option last year, they still will be this year. This is because many factors may have changed in the past six or 12 months.
- Assess your payment options: Most insurers charge less if you prepay your policy instead of making monthly payments. Paying your premiums on an annual basis can help you save hundreds of dollars per year. However, it can be a challenge to scrape together that much money all at once.
- Maintaining a clean driving record is another effective way to lower your car insurance rate. So is maintaining a good credit history.
- You should also consider your policy if you intend to change your location. Moving to a quiet location will definitely contribute in lowering your premium rates.
Which state has the most expensive car insurance?
According to Insurify’s proprietary database of millions of quotes, the most expensive state on average for car insurance is Michigan.