Car insurance is expensive for multiple reasons. You can control some of these factors, such as your driving history and the deductible you choose. There are also factors you can't control that may lead to a high car insurance premium, like your age and the crime rate in your area.

In this article:

How is my car insurance premium calculated?

Your provider calculates your car insurance premium after looking at various risk factors that indicate how likely you are to file a claim in the future. If you show a likelihood of filing claims, car insurance providers will charge you a higher rate to offset their own potential costs.

These rate factors are based on aspects that have been shown to cause higher chances of filing an auto insurance claim, not arbitrary elements. For example, while there is a myth that red cars cost more to insure, there is no evidence to support it. When purchasing car insurance, you are not asked to submit the color of your car, so it's not a contributing factor. The reasons for your car insurance being higher or lower are data-driven.

Reasons why your car insurance is so expensive

Your auto insurance premium may reflect several high-risk factors. While some of these risks are under your control, many aren't. The following are possible reasons why your car insurance premium is so high.

Car insurance rate factors you can control

There are many variables that you can influence toward lowering your auto insurance premium, including your:

  • Driving history: drivers with few or no tickets or infractions tend to have a lower risk factor than drivers with accidents or tickets on their record. The reasoning behind this is the fewer dings on your driving record, the less likely you are to file a claim. If you're deemed a high-risk driver by your car insurance company, the cost for high-risk coverage can be much higher than the average rates.
  • Claims history: car insurance companies can pay out a lot of money for a single claim. Especially if you've filed multiple claims in the past, you can expect to see your insurer offset this cost with an increase in your auto insurance premium.
  • Credit score: your auto insurance score is based on your credit history. If you have a low credit score, this affects your auto insurance score and therefore increases the premium you pay.
  • Car insurance coverage limits: the more coverage you have, the more your auto insurance rate will increase. Most states require you to have their legal limits of liability insurance. If you go for full coverage auto insurance, you can expect to pay more.
  • Policy deductible: in most cases, when you have a low deductible, your premium is higher. Going with a higher deductible lowers your premium in part because you're covering a greater financial part of a claim when they do occur.
  • Car's make and model: you can expect to pay more for car insurance if you have an expensive vehicle. A sports car will cost more to insure than a minivan, not counting other premium cost factors.

Car insurance rate factors you can't control

There are some car insurance rate factors you have little to no control over and are hard to mitigate. The state you live in is a big one. The average national cost of car insurance is $87 a month. The state you live in affects your rate heavily, followed by other factors you may or may not be able to control, including:

  • Your age: younger and older drivers pay the most for car insurance. Teen drivers pay the most of any age demographic due to their inexperience behind the wheel. Drivers age 65 and older pay more than drivers in the 25- to 65-year-old range due to reaction time decreasing as you get older.
  • The crime rate in your area: if you live in a ZIP code that has a high rate of auto theft, your car insurance rates may increase as a result.
  • The number of claims filed in your neighborhood: if your neighbors have filed many car insurance claims in the past, that can equal a high-risk situation and higher premiums.
  • Population density: if you live in a busy, urban neighborhood, there are probably more cars than in a less-populated area. More cars mean higher chances of an accident. This means higher rates.

How to reduce your car insurance rate

Whether you're looking at high insurance rates or not, there are a variety of means through which you can help lower your costs. These include:

Compare auto insurance quotes

A great way to save money on car insurance is to compare quotes from multiple car insurance companies. Having multiple quotes side by side allows you to look at what companies are charging for the coverage you want. This way you can get the best auto insurance coverage at your best price.

Keep a clean credit history

Since your car insurance score is based on your credit history, keeping a good credit score can go a long way toward lowering your car insurance premium. Although it can vary from insurer to insurer, a credit score of 700 or above is usually considered good. 

Bundle your insurance coverage

If you have a life, home or renters insurance policy, you may be able to bundle it with your car insurance. This can lower your car insurance premium, and possibly the premium of the other policy, too.

Take advantage of discounts

Many auto insurance providers stay competitive by offering discounts for car insurance. When comparing quotes, make sure to find out about all the discounts you qualify for.

Raise your deductible

If you can afford to pay more in the event of a claim, consider raising your deductible. Higher deductibles usually mean lower premiums. 

Drop unnecessary coverage

Over time, you may find that your car insurance coverage needs an update. For example, if you sell your car but still need to hold onto liability insurance for when you do drive, you can drop full-coverage insurance if you have it and save money.

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