Finding your car insurance premiums too high? Multiple key factors like your age, driving record, credit score, location and coverage choices determine how much you pay. Understanding these main cost drivers can help you identify ways to lower your rates. This article explores the top reasons insurance gets so expensive and provides tips to reduce your costs through discounts, policy adjustments and shopping around. We'll look at major elements like age, violations, credit, and location while also discussing steps to take to pay less for the coverage you need.
Age
Young and inexperienced drivers tend to pay much higher premiums compared to older, more experienced drivers.
- Teen drivers typically pay the highest rates, often more than double the rate for drivers over 25.
- Rates start dropping around the 25th birthday when drivers are seen as less risky.
- Other important milestones are the 19th and 20th birthdays when significant discounts kick in.
- The reason for high rates is that young drivers are seen as inexperienced and more likely to get into accidents.
- Age and gender also play a role, with young males generally paying the most.
- Older drivers over 65 may see rates creep up again due to higher risks.
Location
The state and even specific city where you live can significantly impact how much you pay for car insurance.
- State regulations play a major role in determining average costs. Some states have stricter regulations that drive up premiums.
- Population density also matters. More congested urban areas tend to have higher accident rates and claims payouts.
Most Expensive States
The most expensive states for car insurance are:
- Michigan
- Louisiana
- Florida
Michigan has the highest average premium in the country at over $2,600 per year for full coverage. Some key reasons are:
- Michigan has no-fault insurance laws requiring unlimited injury protection.
- This results in rampant insurance fraud and litigation.
- Insurers pass on costs through very high premiums.
Louisiana recently overtook Michigan as the #1 most expensive state, with average premiums nearing $3,300.
- Louisiana faces high risk of flooding and hurricanes leading to major claims losses.
- It also requires no-fault insurance with minimum $10,000 injury protection.
Florida comes in 3rd with average premiums around $2,400.
- Frequent hurricanes result in heavy claims from wind and flood damage.
- Florida also requires no-fault insurance and $10,000 minimum injury protection.
Cheapest States
On the other end of the spectrum, the cheapest states for car insurance are:
- Maine
- Wisconsin
- Idaho
These states have fewer regulations, lower risk of natural disasters, and lower rates of accidents and uninsured drivers. Living in these areas can save you hundreds per year on insurance premiums.
So while moving to another state just to reduce your car insurance costs may not be practical, it's still helpful to understand how location impacts rates. Drivers in Michigan and Louisiana face high premiums largely due to external factors beyond their control.
Urban vs. Rural
Population density within states also results in variable car insurance rates:
- Urban areas generally have more congestion and accidents, leading to higher premiums.
- Rural and suburban areas with less traffic and lower accident rates tend to have lower insurance rates.
For example, Detroit, MI pays average premiums of $5,409, while just outside in Dearborn, MI the average is around $3,500. So even just moving to the suburbs can potentially save over $1,900 a year.
Driving Record
Your personal driving history plays a very significant role in determining your car insurance rates. More violations and claims lead to much higher premiums.
- Speeding tickets, DUIs, at-fault accidents all raise your rates.
- The more serious the violation, the bigger the rate increase.
- Violations stay on your record for 3-5 years in most states.
Violation Rate Increases
Here are some average rate increases after common violations:
| Violation | Rate Increase |
|---|---|
| Speeding Ticket | 15% |
| At-Fault Accident | 30% |
| DUI | 100% |
- A single speeding ticket can increase your rates by 15% or more.
- Getting into an at-fault accident can raise your premiums by 30%.
- A DUI conviction can double your car insurance rates.
How Long Violations Affect Your Rates
Violations like speeding tickets and at-fault accidents typically impact your rates for 3-5 years:
- In most states, insurers can't consider violations older than 3 years when calculating your premium.
- However, more serious violations like DUIs may impact your rates for 5-10 years.
- California allows considering violations for up to 10 years.
Improving Your Record
The best way to get lower rates is to improve your driving record over time:
- Allow older violations to roll off your record.
- Take steps to avoid new violations - drive defensively, obey speed limits, etc.
- Consider taking a defensive driving course - this can help offset rate increases from tickets.
- Check your motor vehicle record regularly and dispute any incorrect violations.
Having a clean record with no accidents or tickets can save you hundreds per year on insurance. Drivers with clean records pay average rates 30-50% lower compared to those with violations. So focusing on safe driving is key to lowering your costs.
Credit Score
Your credit-based insurance score plays a big role in determining your premiums in most states. Maintaining good credit can result in significant savings on your policy.
- Insurers use your credit information as an indicator of how risky or responsible you are with finances.
- Poor credit = higher premiums. Good credit = lower premiums.
- A poor credit score can nearly double your insurance rates compared to someone with excellent credit.
Credit Tiers and Average Rate Differences
Here are the average rate differences between various credit tier categories:
| Credit Tier | Average Annual Premium | Difference vs Excellent Credit |
|---|---|---|
| Excellent (800-850) | $1,298 | - |
| Very Good (740-799) | $1,445 | +$147 |
| Good (670-739) | $1,549 | +$251 |
| Fair (580-669) | $1,913 | +$615 |
| Poor (300-579) | $2,506 | +$1,208 |
- Drivers with poor credit scores pay nearly double compared to those with excellent credit.
- But even moving from poor to fair credit can save over $500 a year.
Improving Your Credit Score
Here are some tips for improving your credit and lowering your insurance rates:
- Pay all bills on time - set up autopay if needed.
- Keep credit balances low.
- Dispute and fix errors on your credit reports.
- Limit new credit applications.
- Monitor your credit with free reports.
Focus on paying down debts, staying current on bills, and disputing errors to improve your credit standing. Shop for new insurance rates every 1-2 years to ensure your lower score gets reflected in premium savings.
States That Ban Credit-Based Scoring
Some states prohibit using credit when calculating car insurance rates:
- California
- Hawaii
- Maryland
- Massachusetts
- Michigan
So if you live in these states, your credit score doesn't matter - making it one less thing to worry about. Your rates will be based on just driving factors like record, mileage, etc.
Insurance Company
The insurance company you choose can have a very large impact on how much you pay for coverage.
- Rates can vary by hundreds of dollars between different insurers for the same driver.
- Getting quotes from multiple companies is key to finding the best rates.
How Insurance Companies Set Rates
While all insurers consider risk factors like driving history and credit, they weigh these factors differently in their proprietary rating models. This results in variable pricing between carriers.
- Geico may offer Company A's customers significantly lower rates.
- But Company B could be much cheaper than Geico for a different driver profile.
There's no way to know which insurer will give you the best price without getting multiple quotes.
Rate Variance by Company
Here's an example of real rate differences between large insurers for a sample driver profile:
| Insurer | Full Coverage Annual Premium |
|---|---|
| Geico | $1,759 |
| Allstate | $2,501 |
| State Farm | $2,168 |
| Progressive | $2,025 |
- The most expensive option (Allstate) is $742/year higher than the cheapest (Geico).
- Just switching from Allstate to Geico would save this driver 41%.
Shopping Around Saves Money
To find the cheapest rates:
- Get quotes from at least 4-5 different national and regional insurance companies.
- Compare them side-by-side to identify the lowest options.
- Focus on total annual or 6-month premium costs.
- Consider discounts each insurer offers.
Shopping around when your policy renews is the best way to save hundreds per year without making any other changes. Comparing insurers ensures you never overpay.
Loyalty Discounts
If you've been with an insurer for several years, also ask about any loyalty discounts they can offer you as an existing customer. Long-time customers may get access to special rate reductions.
###Coverage Limits
The amount and types of insurance coverage you buy directly impacts your premium costs. Higher limits equal higher rates.
Minimum Liability vs Full Coverage
At a minimum, states require liability insurance:
- Bodily Injury Liability - covers injuries to others
- Property Damage Liability - covers damage to others' property
Full coverage adds:
- Collision - covers damage to your car from collisions
- Comprehensive - covers non-collision damage like theft, vandalism, weather
Cost Differences
| Coverage Type | Average Annual Premium |
|---|---|
| Minimum Liability | $600 |
| Full Coverage | $1,200 |
- Full coverage costs about double liability-only minimums.
- You get more protection but also pay more.
Raising vs Lowering Limits
Increasing your limits raises your rates:
- 100/300/100 liability costs less than 250/500/250.
- $500 collision deductible costs less than $250 deductible.
Conversely, lowering your limits saves money on your premiums.
Finding the Right Balance
Aim for limits that provide adequate protection without overspending:
- Increase liability limits if you have significant assets to protect.
- Consider dropping comprehensive if your car is old.
- Raise deductibles to $500 or $1,000 to save costs.
- But don't sacrifice key coverages just to lower your rate.
Review your policy limits every renewal to ensure you're getting the optimal coverage for your needs and budget. Adjust limits up or down as your circumstances change.
Bundling Insurance Policies
One way to get full coverage for less is by bundling with other policies:
- Bundle auto with homeowners or renters insurance.
- Insure multiple cars or drivers on one policy.
Bundling can save up to 15% on your car insurance premiums.
Car Model
The type of vehicle you drive is a significant factor in insurance rates. Sports cars, luxury vehicles, and specialty cars tend to have much higher insurance premiums.
Most Expensive Cars to Insure
Here are some of the most expensive vehicles to insure based on average full coverage rates:
- Nissan GT-R - $3,096 per year
- Mercedes S-Class - $2,645 per year
- BMW M5 - $2,600 per year
- Porsche 911 - $2,483 per year
- Audi R8 - $2,450 per year
These tend to be high-end sports cars and luxury vehicles valued from $60,000 to over $100,000.
Cheapest Cars to Insure
On the other end of the spectrum, some of the cheapest cars to insure include:
- Honda CR-V - $1,256 per year
- Subaru Outback - $1,212 per year
- Honda Accord - $1,288 per year
- Toyota Camry - $1,346 per year
- Ford Escape - $1,184 per year
These are modestly priced crossover SUVs, sedans, and hatchbacks ranging from $25,000 to $35,000 in value.
What Makes a Car Expensive to Insure
Factors that raise insurance rates include:
- High-performance - sports cars, turbocharged, etc.
- Luxury makes and models - Mercedes, BMW, etc.
- Newer model year
- Higher sticker price
- Low safety ratings
- High repair costs
So while you can't change the type of car you drive just to save on insurance, it's helpful to understand how the vehicle impacts your rates. Owning a $100,000 luxury car will cost you thousands more per year compared to a $30,000 family sedan.
Ways to Save
A few tips to save on insuring an expensive vehicle:
- Shop extensively to find the cheapest rates.
- Maintain excellent credit and driving history.
- Ask about any discounts for safety features.
- Increase deductibles to $500 or $1,000.
- Insure multiple vehicles on the same policy.
Inflation
Rising inflation rates in recent years have significantly contributed to increased car insurance costs. High inflation drives up claims costs for insurers, which leads to higher premiums for consumers.
- Inflation hit a 40-year high of 9.1% in June 2022.
- This has driven up the costs to repair and replace vehicles.
- Medical costs to treat injured accident victims have also risen.
- To maintain profitability with higher claims payouts, insurers raise premium rates.
How Inflation Impacts Insurance Costs
- Vehicle repairs - Parts, materials, and labor rates have gone up with inflation, increasing the cost of repairing collision damage. This gets passed on through higher premiums.
- Medical claims - The medical costs associated with treating injuries have increased with inflation, raising the value of injury claims.
- Replacement vehicle costs - Replacing a totaled car is more expensive due to inflated new and used car prices.
- Insurer operating costs - Companies face higher costs across operations, from staff to offices, leading to rate hikes.
Historical Insurance Premium Growth
Here is how average car insurance premiums have risen over the years along with periods of high inflation:
| Year | Avg Annual Premium | Inflation Rate |
|---|---|---|
| 2019 | $1,470 | 1.8% |
| 2020 | $1,520 | 1.4% |
| 2021 | $1,630 | 4.7% |
| 2022 | $1,800 | 8.0% |
Premiums have jumped nearly $400 from 2019 to 2022, correlated with inflation spiking to over 8% by 2022.
Outlook for the Future
If inflation remains high over the coming years, expect car insurance rates to continue trending upward. However, if inflation stabilizes back to normal levels around 2-3%, premium increases should moderate as well.
To save money in times of high inflation:
- Shop around annually for the best rates.
- Maintain good driving history and credit score.
- Raise deductibles if needed to offset premium hikes.
- Consider usage-based insurance if you drive fewer miles.
Careful shopping and focus on reducing risk factors remain your best options to find savings and offet the effects of inflationary pressures on auto insurance pricing.
Gender
Your gender can play a role in determining car insurance rates in most states. Specifically, insurance prices tend to be higher for young male drivers under 25 compared to females of the same age.
- Young men generally pay 10-20% more on average than young women for similar policies.
- After age 25, the gender gap in rates starts to even out.
- By middle age, there is typically minimal difference in insurance costs for men and women.
Why Young Men Pay More
Male drivers under 25 tend to pay more for car insurance for a few key reasons:
Higher risk - Statistics show young men get into more serious accidents than women, especially fatal crashes. Their death rate per miles driven is nearly 3x higher.
Greater violations - Young men also receive more speeding tickets and other moving violations than young female drivers.
Riskier driving - Males tend to engage in riskier driving behaviors like speeding, street racing, DUIs, etc.
So due to data showing significantly higher claims payouts, insurers view young male drivers as riskier to ensure, leading to higher average rates compared to equivalently aged females.
States That Ban Gender Discrimination
However, several states prohibit using gender to determine car insurance rates:
- Massachusetts
- Hawaii
- Montana
- North Carolina
- Pennsylvania
In these states, men and women must be offered the same insurance rates regardless of their statistical risk profiles. But in most other states, gender still plays a role in pricing.
Discount Programs
Young drivers of any gender can offset high premiums by:
- Completing defensive driver training courses
- Maintaining good grades - "good student" discounts
- Limiting miles driven
- Adding experienced drivers to their policy
Shopping diligently annually for the best rates is also key to savings. While gender is a factor, focusing on other controllable variables in your risk profile can help minimize the gender gap in pricing.
Rates Even Out Over Time
The notable difference in average car insurance rates between younger males and females dissipates as drivers grow older and gain experience. By the mid-30s, rates typically converge for men and women with clean driving histories, with minimal variances thereafter.
Discounts
Taking advantage of common car insurance discounts can help offset high premiums. Here are some top ways to qualify for reduced rates:
- Good driver - For having a clean record free of violations. Saves up to 30%.
- Good student - If you maintain a 3.0+ GPA. Saves up to 25% for young drivers.
- Defensive driver - Taking an approved safe driving course. Can offset ticket rate hikes.
- Multi-policy - Bundle auto with homeowners, renters or life insurance. Saves up to 20%.
- Multi-car - Insure multiple cars on the same policy. Saves up to 25%.
- Anti-theft - Install approved alarm system or tracking device. Saves up to 15%.
- Advance purchase - Pay 6 months or full year up front. Saves up to 10%.
- Affinity - For belonging to approved organizations like AAA or AARP. Saves up to 10%.
Ask your insurer what discounts they offer during the quote process. Discounts provide relatively easy savings on premiums through simple steps like taking driving courses or improving your grades.
Multi-policy bundles and maintaining a stellar driving record offer some of the highest possible savings. The more discounts you can combine, the greater the rate reduction.
Some key tips:
- Take online defensive driving courses every few years.
- Improve your grades if you're a student.
- Add drivers or vehicles to a single policy.
- Maintain clean driving history.
- Review discounts yearly - eligibility criteria changes.
Discounts provide great opportunities to chip away at high insurance costs for many drivers. Find and use as many relevant discounts as possible.
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