Why Is My Car Insurance So High?

Dustin Hawley | Apr 21, 2021

Insurance premiums are a necessary expense for every car owner. Nearly every state requires its drivers to have some form of insurance, typically a minimum of liability coverage. It serves to protect every traffic participant from property damage and aid in paying for medical treatment in the unfortunate event of an accident.

why is car insurance so high

Without insurance, drivers would be at constant risk of a substantial financial loss, and even worse, inability to get adequate health treatment. It is not difficult to see why we need to pay for insurance, but there are many misunderstandings around how premiums are calculated. 

Let’s explore some of the reasons your car insurance rates may be high and discuss ways to lower them. 

How Are Insurance Rates Determined?

The cost of insurance depends on various factors, most notably the type of coverage you’re getting. 

Minimum liability coverage is mandatory in nearly every state, but the operative word is minimum. There are many additional options to increase your safety. Calculating the insurance fee, also known as a “premium,“ can sometimes be challenging. Companies have to draw from several data points and statistics to calculate the likelihood of a specific driver being involved in an accident. 

Driving Record & Claim History

Your driving history is an essential factor in determining how high the price of your insurance premium gets. Being involved in accidents can significantly increase your premium, especially if they resulted in significant damage. Parking accidents and minor fender-benders aren’t as crucial, as drivers tend to settle them privately. 

This leads us into a discussion about claim history. When you file a claim with your insurance company, an insurance adjuster will contact you for additional information regarding the accident. Once all the details have been collected, a resolution will be found and you will be paid out. Every payout you receive is logged and recorded, and they will affect the pricing of future premiums. However, there’s a clear distinction between no-fault and at-fault claims, with the latter having a far more profound effect on your insurance rates.

Traffic violations are also reviewed. Drivers with an extensive history of speeding, running red lights, or driving under the influence can have a difficult time securing a sustainable insurance premium. By adhering to traffic laws, not only will you be safer, but also enjoy reduced insurance costs.

Type Of Vehicle

A vehicle’s specifications have a lot to do with insurance costs. The most prominent factors include:

  • Vehicle make and model
  • The number of active and passive safety systems in the car
  • Costs of repair or replacement of a damaged car
  • An Insurance Institute for Highway Safety (IIHS) report on vehicle safety
  • Risk of theft 

Residence And Parking Location

It may seem like a non-factor, but your home address and where you park your vehicle matter. Parking on the street or the driveway in a low-income neighborhood presents a greater risk of damage and theft, whereas a residential complex with a gatekeeper, personal garage, or secured parking lot positively affects the premium. 

Driving Habits

While it’s often overlooked by the insurer, your driving habits will often be considered when determining the costs of your insurance premium. These costs are related to the purpose of your travels & commutes and the average mileage. The risk of accidents naturally increases the more time you spend on the road. It’s one of the reasons why professionals like taxi drivers have such high insurance costs. 

Personal Information

Drivers can significantly affect their car insurance rates by purchasing the right car, adhering to traffic laws, and having a clear claims history. However, certain factors are determined simply by age, sex, profession, and marital status. 

For instance, a teenager who is trying to insure their first car will have to pay a much higher premium because they lack driving experience. Being that they present more of an initial risk to the insurer, prices are higher, which is why the insurance typically goes through the parent in these situations. Statistically speaking, drivers under the age of 25 have the highest probability of being involved in an accident, reflecting in their increased insurance costs. 

Additionally, the IIHS has concluded that men are more likely to be involved in serious accidents. The death rate is also higher for men, which is why insurance is generally more expensive for males than for female drivers. Also, being married can result in lower premiums than for those who are single, divorced, or widowed.

Types Of Coverage

The type of coverage you select greatly affects the yearly insurance premium. Liability insurance only covers minimal vehicle damage and injury costs. Being that liability only covers the other driver, you’ll need collision coverage to recuperate your losses in the event of an accident. 

A comprehensive premium provides a variety of additional coverage options, including protection against events like theft or natural causes. However, damage by natural elements like hail, falling objects, flood, or fire, represents an individual clause in the contract. Being underinsured is common for many drivers, and a comprehensive insurance package will save you the trouble of taking a responsible party to court in the event of an accident.

Once you begin to add in the variety of additional layers of coverage, you can see how the premium can quickly escalate. The listed examples are the most important to include, but there are many others that come into play as well, like GAP insurance, towing, and rental car coverage that could raise the price even more.

Summary

These days, high insurance premiums have almost become the standard. Modern cars can be moderately expensive to repair and maintain, which only works to drive insurance rates up. To get the lowest rates, you need to maintain an accident-free record, have a good credit score, make your payments regularly, and own the right kind of vehicle.

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