If you’ve been looking for new car insurance coverage, you’re probably asking yourself, “Why is car insurance so expensive?”
Insurance companies look at several factors when calculating car insurance quotes. These can include everything from your driving history to your credit score and everything in between.
In this article, we’ll answer the question, “why is car insurance so expensive?” and share several steps you can take to lower your monthly premiums.
Factors that affect how much you pay in car insurance
If the car insurance quotes you’ve been getting are high, it could be because you have one or more factors that insurance providers consider “high-risk.”
Underwriters view these drivers as more likely to make a claim on their insurance policy, which translates into higher premiums.
Despite a good driving record, you could be looking at higher car insurance premiums than someone with several accidents.
Insurance premiums are based on more than just how well you drive, including the following.
Age
Drivers usually see a drop in their premiums once they turn 25, but contributing factors like poor credit or traffic tickets can impact premiums. Rates generally continue to drop with each birthday until drivers turn 60—when insurance rates begin to rise again.
Gender
Statistically, male drivers are involved in more auto collisions than female drivers. Because of that increased risk, male drivers frequently pay higher premiums than their female counterparts.
Marital status
Many couples share a car(s), which can mean lower individual insurance premiums if you both have good driving history.
Credit score
Insurance company underwriters typically view drivers with poor credit as more likely to file insurance claims, especially for smaller items, resulting in higher premiums.
Driving record
Your complete driving history is a major factor in determining auto insurance premiums. Drivers with a history of accidents can expect higher monthly payments.
History of claims
Drivers with a history of claims will typically have bigger premiums because insurance companies expect claims on any new policies they issue.
How much you drive
If you spend a lot of time behind the wheel, you’ll see higher premiums than someone who drives infrequently. More time in the car and on the highway increases the likelihood of claim-worthy damage or accidents.
Location
Where you live has a lot to do with how much you’ll pay for car insurance. If you live someplace with a lot of car thefts, your auto insurance rates will reflect the increased chance of your car being stolen with higher premiums.
Type of vehicle
Certain cars are more likely to be stolen. For example, Honda Accord drivers typically pay higher premiums since the Accord has been the most stolen car in the United States for over a decade.
13 tips to lower your car insurance
If the auto insurance quotes you’ve been getting are higher than you’d like, there are several things you do to reduce your premiums.
1. It pays to comparison-shop
Insurance rates can vary widely depending on the insurer. That’s why getting multiple car insurance quotes from different companies is important.
And don’t just compare monthly premiums—compare the coverage you’re getting for the quoted rate. You won’t be saving money if the coverage is less than you need.
2. Consider increasing the deductible
Increasing the deductible can lower your car insurance premiums. Bigger deductibles can make sense for good drivers with both collision and comprehensive coverage. You’ll need to pay more if you file a claim, so putting a little extra money aside can help offset any potential out-of-pocket expenses.
3. Ask for discounts
Ask if the insurer offers a discount when getting car insurance quotes. Many car insurance providers offer safety-related discounts.
For example, you could get lower monthly insurance premiums if your car has an anti-theft system or driver and side airbags.
Many new drivers can also get a break on their insurance premiums by taking state-approved driver’s education programs.
4. Choose your vehicle make/model carefully
Some cars are more costly to insure. For example, convertibles are typically more expensive to insure than sedans, and full-size pick-ups are stolen more often than Teslas.
5. Pay in advance
Paying for your insurance in advance can save you money if your budget allows for it. Many insurance companies offer options to pay quarterly or annually. Customers who pay in advance can often save on monthly premiums.
6. Ask for a lower rate
Sometimes, the best way to lower your insurance premium is to ask for it. With increasing competition among auto insurance companies, your provider may be willing to give you a lower rate in exchange for your business.
If they cannot lower your premium, they may offer other perks to lessen the sting of monthly payments.
7. Turn off auto-renew
Insurance policies often auto-renew—unless you intervene. When your policy is up for renewal, reach out to your insurance provider and ask what the best available rate is. Policies don’t automatically renew at the lowest available rates—in some cases, they renew at the highest available rate.
8. Keep it simple
Each modification you make to your vehicle will potentially increase its value and, therefore, the cost for an insurance company to replace or repair it. To keep your rates as low as possible, only make necessary modifications that improve the vehicle’s safety or security.
9. Take advantage of a work-from-home discount
If you transition to a remote job, let your car insurer know. The company may still have on the books that you drive 10 or 12 thousand miles per year. But if you drive less now, you could be eligible for lower premiums on a low-usage policy.
10. Check out by-the-mile car insurance
Speaking of driving less, a by-the-mile or pay-per-mile policy might save you money. These plans charge you a discounted daily or monthly rate, then a per-mile rate. The less you drive, the more you save.
11. Improve your credit score
Pay all your bills on time, avoid collections, and limit your credit usage. These actions will help improve your credit score. Once you have a higher score, contact your insurer and ask for lower premiums.
12. Drive safely
Of all the factors that can contribute to your monthly premium, how you drive is arguably the biggest.
Maintaining a safe driving record, obeying traffic rules, and avoiding accidents will help you get—and keep—a lower insurance rate. Some providers even offer a “no claim” discount to policyholders who do make a claim on their insurance.
13. Park inside
Avoid parking your car on the street. Parking in a garage or other protected environment not only makes it more difficult for someone to steal your car, but it also protects your vehicle against damage from weather or falling objects.
Plenty of ways to save
Yes, car insurance can come with sticker shock. But savvy drivers are finding ways to lower their premiums.
There’s not much you can do about your age, location, or other factors. But there are plenty of opportunities to get cheaper insurance if you look hard enough.
