Why is Car Insurance So Expensive? Understanding Rating Factors

If you are wondering why is car insurance so expensive, there could be multiple reasons at play. First off, it’s good to understand the rating factors that car insurance companies use to determine an individual’s auto rates. It could be possible that one or more of these factors are the reason your auto rates are high.

There are 6 major factors that go into making your car insurance rates. These factors include your marital status, age, gender, zip code, driving record, and vehicle characteristics.

1. Marital Status-If you are a married individual most companies will offer a discount for this.
2. Age-Your age is a factor due to your driving experience, if you are a youthful driver your rates will be higher in comparison to drivers over the age of 25.
3. Gender– This is a highly debated topic, but the fact is, gender still plays a factor in most states in the U.S. The reason is females pay less for their auto insurance than males, who are statistically a higher risk.
4. Zip Code/City-Your zip code is a big factor with rates due to the level of population in your area. The higher populated a city is, the higher your rates will be.
5. Driving Record-As you might have guessed, if you have accidents, tickets, or even minor violations on your record, your rates will be higher.
6. Vehicle Characteristics-Lastly, your vehicle’s characteristics are important due to the value of your vehicle. The newer the vehicle, the higher the cost it will be to insure that vehicle.

Many factors are out of your control…age, gender, marital status, and even zip code. But thankfully, there are things you CAN control, such as your credit and insurance score.

Why is Car Insurance So Expensive? How Your Credit and Insurance Score Affect Your Rates

Here is an example of some of our insurance providers and how a bad credit score can affect your rates!

Insurance Company	Average Rate: Bad Credit	Average Rate: Good Credit
Dairyland	$145	$139
Bristol West	$150	$140
National General	$150	$138
Progressive Insurance	$152	$129
GAINSCO	$165	$157

If you have a credit score below 670, this is considered a bad score. An insurance company will conclude that a bad score means someone will not be reliable in making their monthly payments, and this will mean higher monthly rates than a person with a good credit score.

While the impact on your rates can be significant, all hope isn’t lost for someone with bad credit! Besides working hard to improve your credit score, there are discounts you could still be eligible for. You can also pay your insurance premium in full, which will cut down on the overall cost of insurance as opposed to paying monthly.

If you are wondering why is car insurance so expensive after the agent ran a report for your insurance score, it might mean your credit history isn’t so great. Your insurance score can impact your rates in a negative way, or a positive way, so be sure to be responsible with that score if possible!

This means you should NOT switch from insurance company to insurance company, or cancel a policy with unpaid premiums.

Having prior insurance for at least 6 months can mean the difference between paying $30 to $50 more each month.

Why is Car Insurance So Expensive? – Inflation

Premiums can increase for many different reasons. In today’s day and age, inflation is a huge reason why rates are increasing throughout the U.S.

Other reasons include rate increases per area due to an increased amount of claims, or accidents. Changing your address to a higher populated zip code can also increase your rates. And, of course, if you find yourself with a new speeding ticket, or an accident this will also affect your rates in a major way. 

Inflation can also be attributed to the pandemic as well. Does Covid-19 possibly have anything to do with car insurance?

Driving behavior has returned to pre-pandemic levels, contributing to the high amount of accidents and claims this year.

The cost to repair and replace vehicles has also skyrocketed. Have you heard about the chip shortages? It’s so bad that car manufacturers are even shutting down plants. It’s madness! And it’s directly affecting auto insurance costs.

Action to take Now

In addition to the above suggestions, such as taking care of your credit, and asking your insurance agent about discounts, there are things you can do to help reduce your auto insurance premiums.

1. Adjust your Deductibles: Some insurance companies such as Progressive offer deductibles as high as $1500 for comprehensive and collision. The higher you set your deductible, the lower your monthly payments will be.
2. Individual Driving Programs: Progressive uses a program called Snap Shot, National General utilizes something called Dynamic Driver, and you may have heard of Travelers’ program called Intelli Drive. These programs monitor driving habits and offer up to 30% off the total premium if you have data to show your good driving habits.
3. Discounts: We can’t stress enough, ask your agent about potential discounts. Something as simple as going paperless for example can knock up to $50 off your entire premium. Take a look at the following discounts and see what you might qualify for:

DISCOUNT OPPORTUNITIES
Paid in Full Discount
Multi-policy
Association membership
Anti-lock brakes
Prior insurance
Years of riding experience
Prompt payment
Education discount
Garaged or locked storage
Continuous Insurance Discount
Operator’s Education Course
Operators Safety Course
Advanced quote
Vehicle usage & Mileage
Approved safety course
Homeownership Discount
Paperless

Other Helpful Links
Auto Insurance Facts vs Myth
Understanding Auto Insurance
Umbrella Insurance Explained
Average Cost of a Car Accident
Difference Between Comprehensive and Collision Coverage
Why is Car Insurance Expensive?
Why Are My Insurance Rates so High?
Why Being an Insurance Agent is a Great Career Choice

Last Updated on July 19, 2023 by Lauren Mckenzie