Why Is My Car Insurance So Expensive?

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In some cases, car insurance payments over a years time can total more than what you paid for your car. Car insurance is especially expensive when you lease or finance a vehicle because you need more extensive coverage. Let’s talk about what makes car insurance so expensive and why rates vary from person to person.

Reasons Your Car Insurance Is So Expensive

Car insurance can be obscenely expensive! The overall cost of your car insurance is dependent on many different factors from your credit score, your driving history, what state you live in, how long it’s been since you last had coverage, and how nice your car is.

If your car insurance is expensive here are some reasons why this is likely the case:

  • You have a poor driving record
  • You have a history of making claims
  • Your credit is bad
  • You drive a lot
  • Your demographics
  • You live in an expensive state
  • You have your children on your policy
  • You are under 25
  • Your car is considered high risk or unsafe
  • You have an SUV

Your Driving Record Is Poor

If you have a history of speeding tickets, running red lights, or accidents, your insurance is likely to be far more expensive every month.

When you are quoted for insurance, the insurance agency will pull your driving history. Based on this information and other factors we’ll get into, they determine how high risk you are as a client and will price out your policy accordingly.

If your driving record is poor, even if the accidents on your record happened a long time ago, your insurance premium will be high.

You Have A History Of Making Claims

The point of insurance is to protect yourself from paying for damage to your car, however if you do file a claim, you are much more likely to incur a higher monthly insurance bill in the future.

The type of damage makes a big difference. If you have a history of totaling vehicles and making claims for them then your insurance will be especially high. If you’ve been involved in a fender bender or two you will see a jump in your premium but it usually won’t be dramatic.

It pays off to have the right insurance company here. USAA tends to be especially forgiving. Other companies like Allstate offer accident forgiveness.

Your Credit Is Bad

Research shows that people who have good credit tend to make fewer claims. Whether this is because they are higher income and pay some costs out of pocket, or they are safer and more reliable as people, we are unsure. To the insurance agencies, their bottom line boils down to risk. Because people with a good credit history make less claims, the insurer pays out less money, making them lower risk. 

Most insurance agencies will offer a discounted monthly premium to their policyholders with a great credit score between 10% and 20%

You Drive A Lot

Your premium is also based off of how many miles per year you drive. The more you are on the road, the more likely you are to be involved in an accident, make a claim, and cost the insurance agency money.

So while you may be unbothered by a long commute, you will be paying the price every month in your insurance premium. Even more reason to keep your job remote now that the pandemic is over.

You can limit your auto insurance expenses by choosing other forms of transportation when you can. Options like walking, biking, carpooling, trains, subways and even busses are not only better for the environment but they are better for your wallet too!

Your Demographics

It really shouldn’t be legal in my opinion, but insurance agencies will use demographics like your age, sex and marital status to determine how high risk you are as a client and will adjust your policy accordingly.

Males below the age of 25 tend to be the highest risk demographic, and for this reason they pay the most in car insurance. Now this is to a certain extent and is just one of many factors. It does influence the price of your insurance policy, but less so than your actual driving record.

Where You Live

Insurance premiums are also dictated based on where you live. Some states are far more expensive than others to insure a vehicle. Obviously most of you aren’t going to move just because your insurance premium is a bit higher than it would be if you lived in a state like Wyoming, but it is an important factor to keep in mind.

All of our data comes courtesy of our friends at Compare.com

StateAverage Insurance Cost
Alabama



$723
Alaska$872
Arizona$844
Arkansas$736
California$841
Colorado$857
Connecticut$1,049
Delaware$1,146
Florida$1,185
Georgia$897
Hawaii$765
Idaho$574
Illinois$804
Indiana$666
Iowa$666
Kansas$698
Kentucky$802
Louisiana$1,232
Maine$618
Maryland$1,017
Massachusetts$1,059
Michigan$1,231
Minnesota$788
Mississippi$827
Missouri$745
Montana$693
Nebraska$682
Nevada$985
New Hampshire$775
New Jersey$1,266
New Mexico$763
New York$1,235
North Carolina$655
North Dakota$638
Ohio$703
Oklahoma$824
Oregon$828
Pennsylvania$878
Rhode Island$1,148
South Carolina$854
South Dakota$616
Tennessee$738
Texas$934
Utah$784
Vermont$680
Virginia$751
Washington$884
Washington D.C.$1,190
West Virginia$855
Wisconsin$665
Wyoming$657

You Have Children On Your Policy

We love our children, but one of the downsides of youth is recklessness and lack of life experience. These two things will drive your insurance premiums through the roof! If you have your children under your insurance policy, know that you could also be liable for any trouble they get into if they are minors. It may be a good idea to put them on a separate policy with a car titled to them.

You Are Under 25

As we just discussed, youth brings recklessness which leads to greater instances of accidents. Because of this if you are a driver under the age of 25 your premium will be higher. This is obviously a factor that is completely out of your control.

Your Car Is Considered High Risk Or Unsafe

If you have a vehicle considered to be unsafe by the insurance companies you will pay more to be insured. SUVs will typically cost you more than sedans.

Owning An SUV Will Cost You

If you are in the market for a vehicle and are considering an SUV, know that they cost a pretty penny to insure. Larger vehicles are usually not as safe and therefore are more expensive to insure. If you need a big SUV for any variety of reasons, don’t let this stop you, but be sure to factor in the added cost to the total value of the vehicle, because it will make a difference!

Sedans tend to be safer vehicles and less expensive to repair. Owning one can save you quite a bit of money, both in fuel costs and in insurance premiums. 

What Makes A Car Expensive To Insure?

A newer car will be more expensive to insure because it is worth more, however there are other factors concerning your specific car that will make it more or less expensive to insure like the safety rating, the make, model, color, and features.

The more a car is worth, the more expensive it will be to insure. A standard model of a car will have a less expensive policy than the same car with all the bells and whistles. When you are buying a car this should be a factor in the overall cost of the car. Don’t buy more car than you can afford to insure.

What The Different Types Of Car Insurance Will Cover

Insurance coverage is for breaks or repairs needed due to outside circumstances not relating to mechanical failure. This may include a collision accident with another vehicle or running into a light post after swerving to avoid hitting an animal in the road.

It could also include flood damage or falling tree branches (comprehensive coverage). Insurance may also cover the difference between what your totaled vehicle is worth when compared to how much you have remaining on your loan (gap insurance). There are quite a few options

You can pay for extra insurance, however the bottom line is that you are LEGALLY REQUIRED TO HAVE SOME FORM OF CAR INSURANCE by your state,

The bare minimum coverage you are allowed to have will include whatever your state’s minimum coverage limit is. This varies by state.

The 3 insurance forms that most states will require you to have are:

  • Liability insurance, which pays for any expenses due to an accident that you are considered at fault for. Generally, this includes liability, bodily injury, and property damage liability coverage.
  • Personal injury protection (PIP) or MedPay to cover any medical expenses accrued after an accident.
  • Uninsured and underinsured coverage to pay for damages caused by drivers without car insurance or without enough car insurance to pay for the damages they cause.

Here are some of the other types of car insurance that may be optional for you to purchase and what they are designed to cover, courtesy of NerdWallet:

Coverage typeWhat it pays for
Bodily injury liabilityMedical costs due to injuries or deaths from an accident you caused.
Property damage liabilityRepair costs for property you damaged in an accident.
Uninsured motorist bodily injury liability Medical costs after an accident with an uninsured driver.
Uninsured motorist property damage coverageRepair costs after an accident with an uninsured driver.
Underinsured motorist coverageExpenses from an accident with a minimally insured driver. This coverage pays once the underinsured driver’s coverage limits have been met.
Collision coverageRepair expenses from traffic-related accidents, regardless of who is at fault.
Comprehensive coverageRepair costs from events outside your control — including weather events, hitting an animal while driving, theft and vandalism.
Medical payments coverageMedical expenses for you and your passengers after an accident regardless of fault.
Personal injury protection insuranceMedical expenses, as well as lost wages, child care, funeral costs and other losses due to an accident regardless of fault.
Gap insuranceThe difference between what you owe on your car and your car’s true market value.

How To Save Money On Auto Insurance

There is no question that having adequate coverage when it comes to auto insurance is the smart choice to make, however paying for auto insurance isn’t always overly affordable. Auto insurance in some cases can cost more than your car or even more than your monthly rent payment. 

How To Save Money On Insurance Premiums

  1. Shop around for the best deal
  2. Raise your deductible
  3. Reduce optional insurance
  4. Put more than one car on your policy
  5. Bundle your home, boat, and motorcycle insurance with your car
  6. If you don’t drive a lot, take advantage of low mileage discounts
  7. Add other discounts wherever possible

Shop Around To Find The Best Deal

We all know that we should never take the first offer when it comes to most things, well this DEFINITELY applies to shopping around for car insurance. Different companies are going to give you different quotes and you can save a lot of money (and I mean thousands of dollars per year) by picking the company and plan that is right for you. 

You want to get at least five quotes before you sign up for one and the best way to do this is by getting quotes from different types of insurance agencies. Types of insurance agencies you can contact include:

  • Agencies who use their own agents
  • Agencies who offer quotes online
  • Agencies who use independent agents
  • Agencies who give quotes over the phone

If you’re nearing the end of your policy, or it has been a few years since you have looked, it doesn’t hurt to call around and get a quote from a few other agencies before you renew your current policy, especially if your premium has gone up for your current company. 

Keep in mind that the lowest price isn’t always the least expensive option! You want to factor in value and the company’s reliability. Be sure you have a good feeling regarding whatever company you decide to sign a policy with. It is advisable to go with your gut when you sense a company is bad news, keep looking!

Raise Your Deductible

The deductible on your policy is how much you have to pay out of pocket before your insurance will begin to throw money at whatever claim you are making. Raising the deductible on your policy can be a great way to save money on an insurance premium, which is the monthly amount you will pay to your insurer every month. 

You’ll want to be sure to keep an extra supply of cash to cover your deductible should you ever need to make a claim. 

Reduce Optional Insurance

In some cases you may be paying for coverage that you don’t need. If your car is worth less than 10x your monthly insurance premium, you may want to consider reducing your coverage. 

Especially if you have comprehensive coverage and live in an area that doesn’t have natural disasters often. Call your insurer and find out what you can do to lower your rate and what type of coverage that will leave you with. 

Put More Than One Car On Your Policy

Generally insurance companies offer a discount if you put more than one vehicle on an insurance policy. If you and your domestic partner or child is not on the same policy with you, you should consider looking into bundling the two policies. Call the insurance agency and have them draw up a quote for adding the extra vehicle then compare costs.

Compare Insurance Costs Before You Buy A Car

The price of your monthly premium is based largely on the value of the car, the cost to repair it should you get into an accident or an outside incident damages the car, and how likely the car is to be stolen. Many insurance companies offer discounts for safe cars or for vehicles with built in anti theft features.

So if you’re in the market to buy a car, you should be sure to compare the cost of insuring the vehicle before you buy. You can use the Insurance Institute For Highway Safety ( IIHS) rating tool to help you determine which vehicle is going to be not only the safest, but the least likely to give you issues with theft, and the cheapest to insure in the future.  Here are some resources for doing your research on this topic before you buy. 

Don’t Let Your Coverage Lapse

If you have had insurance in the past, and decide (say because it’s covid19) that you don’t want to drive at the moment and want to discontinue your car insurance to cut costs. Be warned, your premium will go up substantially when you decide you are ready to reinstate a policy and get back on the road. The longer that you go without insurance, the more money you will pay in the future for your monthly premium

Bundle Your Home, Boat, and Motorcycle Insurance With Your Car

We’ve all seen the commercials from the insurance agencies encouraging you to do this. Yes they do want your added business and to take more money from you every month, BUT you can actually save some money here too. Again, shop around for the best deals, make a spreadsheet and compare your options. 

In a lot of cases bundling all of your insurance policies under the same provider can end up saving you both time and money. The company usually makes it very convenient. This will save you a lot of time when you’re only cutting one check a month for insurance instead of keeping track of tons of different policies (depending on what assets you own). 

If You Don’t Drive A Lot, Take Advantage Of Low Mileage Discounts

If you are a driver who gets behind the wheel very infrequently or only drives short distances, be sure to let your insurance agency know. Usually insurance companies will give a significant discount to those who drive less than the yearly average. 

If possible consider using mass transit to keep your mileage low. Not only is taking public transportation good for the environment and helps you reduce your carbon footprint, it can also help you save a lot of money. Consider making small changes like biking to the grocery store instead of driving. 

With you on the road less, you are far less risky to insure. This is because the odds that you’ll be in an accident are reduced. 

Take A Safe Driving Course

Most states have driver’s education courses. In some cases, insurance companies will provide a discount to those who take and complete these safe driving courses. If you have points on your license from an accident or a moving violation, you can also have some of the points removed by completing one of these courses. 

Before you run out and sign up for one of these classes, call your insurance agency and discuss potential savings upon completion of one of these courses. You may not be eligible for this discount or the price of the course can in some cases outweigh the savings. If you are eligible and the discount seems worth it, ask your insurer to recommend a few programs that they accept. 

Track Your Driving Using Telematics

If you are comfortable using a tracking system in your vehicle, using telematics to prove what an awesome driver you are is a great way to go. These usually come in the form of an app or a small device that plugs in under your dashboard. The device will track things like your average speed and how quickly you brake to determine what type of driver you are. The safer you drive, the more discounts you will receive. 

Hold On To Your Car

If you love your car, keep it for a while. Studies show that every year your car ages, your premiums will drop 3.5%

Add Those Discounts 

Safe Driver: Insurance companies will usually offer discounts to those who haven’t gotten any moving violations within a certain period of time. Similarly, drivers who haven’t been involved in any sort of accident will see monthly premium savings as well. 

Good Student Discount: If you have a young driver in your household who is on your policy, you can receive a discount for maintaining a GPA above a 3.0 in other words above a B average. 

Auto Pay: insurers will usually give policyholders a discount when they set up automated billing. This is because they are more likely to get paid if they simply remove the insurance premium from your account every month. 

Pay Up Front: In some cases your insurance agency will allow you to pay 6 months to 1 year in advance. When you do this, they will offer you a discount. Just be sure to take into account the time value of money when determining the added value of paying your insurer up front. 

It doesn’t hurt to ask: Be sure when deciding on a policy to ask the agent what discounts the company can offer you. You may be surprised what you find and the money you can save, but keep in mind that what really matters is the overall price of the policy. An insurer may not offer you any discounts but can still be your least expensive and best value option. 

Buy A Hybrid Or Fuel Conscious Vehicle

There are a lot of insurance agencies who will reward you for being environmentally friendly. Farmers Insurance for example offers a 5% discount for owning a hybrid vehicle. So you can feel great about protecting the environment and being cost effective all at the same time. 

Location Makes A Difference 

While it seems very unlikely that you will allow insurance rates to dictate where in the United States that you decide to live, know that it does affect how much you pay. States like Florida and California have average premiums MUCH higher than less populated and less car accident prone states like Montana.

If you are planning on moving to a new state in the upcoming months, you’ll want to factor this added cost in. 

How Can I Negotiate On Car Insurance

Unfortunately you can’t negotiate on car insurance. You can do things to modify the policy like increasing your deductible and decreasing coverage to drop the price, but you can’t haggle with the insurance companies on your existing policy. 

You can however call around and get quotes from competing companies. There are a ton of insurance companies

What To Do If You Can’t Afford Car Insurance

If you are struggling to afford your car insurance you may want to consider doing these things:

  1. Sell your car and buy something cheaper to insure
  2. Reduce your coverage
  3. Do away with your comprehensive insurance policy
  4. Increase your deductible
  5. Consider utilizing public transportation to lower your rate

When To Reduce Car Insurance Coverage

You should probably reduce the coverage of your car insurance if your premium is coming out to close to the value of your car. In most states you will still need coverage for hitting someone else, but you can reduce the coverage of damages to your own vehicle. A general rule of thumb is to reduce coverage if your monthly premium is more than 1/10th of your vehicle’s value. 

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About Protect My Car

Protect My Car is an extended auto warranty company. Our goal here at Protect My Car is to eliminate your worry of being financially responsible for an expensive mechanical breakdown. With our extended auto warranty, you don’t have to worry about being fully burdened with the cost of a covered repair.

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