Updated May 6, 2019

Why is My Car Insurance So High

Paying too much for auto insurance? You aren't alone. Read on to find out why rates are so high and what you can do about it.

You just received your auto insurance renewal offer and notice that the rates have gone up AGAIN. Each year, auto premiums seem to increase. But why?

Insurance companies look at historical data to find where most claims occurred and the type of people who were involved. Higher rates apply to the locations and groups that are most likely to have a higher number of claims.

If you fall under one of the "higher risk" groups of people, then your auto rates will be higher than someone who is in a lower risk group. Read on to learn more abiut the factors affecting your car insurance rates.


Big cities have more claims than rural areas. Most people living in cities pay higher auto premiums than people living in small towns or the country.

However, you don't have to live off the grid just to save on insurance. Even within large cities, some areas are more prone to accidents. These are the places with higher rates.

Other factors also play a part, including crime and even unemployment rates.

Did you Know? In California, the most populous state, San Luis Obispo County has the the lowest car insurance rates. This is largely due to it being less populated than many other places in the state.

The highest rates come from Los Angeles County and the San Francisco Bay area, the two most heavily populated parts of the state.


Drivers under 26 years old will face high insurance rates. Even young drivers who have clean records still get grouped in that higher-risk category.

Statistically, young drivers have a large number of claims. But there are other factors, too.

  • They tend to have low or no credit scores.

  • Their clean driving record may be related to a lack of driving experience.

  • Generally, they aren't in a financial position to afford multiple policies (which brings discounts).

Consider staying on your parents' or guardians' insurance policy for as long as they allow you to. You can pay them directly for your portion of the bill, saving you money.

Claims History

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Insurance companies categorize people into two broad categories: high-risk drivers and low-risk drivers. They look back 3-5 years at claims and driving history to determine where to place each person.

Additionally, these categories impact how much your rate will increase with a new claim.

  • High-Risk Drivers
    With multiple previous claims and/or a bad driving history, high-risk drivers can see 10% and 20% increases based on a new claim.

  • Low-Risk Drivers
    Your insurance still might rise as a result of a claim, though typically less than for a high-risk driver.

A lot will depend on the severity of the claim. If it's an at-fault accident that paid out tens of thousands of dollars in damages, then you'll likely see a premium increase.

Many companies offer accident forgiveness programs that guarantee one accident won't affect their rates, but these are only offered to qualified customers. How do you qualify? It's slightly different for each company, but generally:

  • Make sure your insurance company offers this option in your state.
  • Have no prior claims.
  • Have minimal driving activity, such as traffic violations and speeding tickets.

If you don't qualify for accident forgiveness, then you will need to go 3-5 years without filing a claim for your past claims to drop from your insurance.

Driving History

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People with a lot of activity on their driving record tend to be involved in more accidents. This activity may include:

  • Multiple Speeding Tickets
  • Seatbelt Violations
  • Running Red Lights
  • Other Infractions

Rates will be considerably higher for people with multiple violations on their record. Many insurance companies won't take you as a new customer if you have several violations in the last 3-5 years.

DUIs also have massive consequences on auto insurance. If you get a DUI, you will likely need to acquire an SR-22 on your insurance policy.

An SR-22 is a certificate that the insurance company sends to the state, proving that you have insurance and are in compliance with state requirements.
SR-22s aren't offered by every insurance company. While the certificate itself doesn't cost much money, the fact that it goes along with somebody with multiple claims and multiple violations means they are classified as a very HIGH-RISK driver. This will bring very high premiums.

Insurance History

For new auto policies, insurance companies want to know whether you've had insurance prior to your current policy (usually within the last 12 months).

People without insurance tend to fall into the higher risk group of people with multiple accidents and violations. If you didn't have prior insurance before starting your current policy, your rates will be higher.

Avoid gaps in insurance coverage. Be sure to renew your policies and double-check that the dates align when you switch companies.

Vehicle Type

Newer, more technologically advanced vehicles are more expensive to repair. This makes them more expensive to insure.

Most companies also give out multi-vehicle discounts, making it less expensive per vehicle with multiple cars on your policy. Ironically, it can be more expensive to insure one vehicle than have two on the same policy.

If you fall into the high-risk category, driving an older vehicle can greatly reduce your rates. Older vehicles allow you to carry liability-only coverage.

Vehicle Coverages

The most expensive part of any auto insurance policy is usually the physical damage coverage to your vehicle, aka Comprehensive and Collision (collision tends to be the most costly).

You can lower the cost of these coverages by raising the deductibles.

  • Newer Vehicles: Consider raising your Comp and Collision deductibles to $500 or $1,000.

  • Older Vehicles: Drop both Comp and Collision and just carry liability limits.

Avoid lowering your liability limits, however. While legally you need to carry only the state minimum to comply with the law, these limits aren't nearly enough if you are involved in a major accident.

The cost of lowering liability coverages isn't worth having to pay tens or hundreds of thousands of dollars in damages out of your own pocket.

Credit Score

Credit scoring is somewhat new in insurance, but almost every insurance company uses it. Most of them call it by another name, such as insurance scoring.

People with bad credit scores are more likely to have claims, so insurance companies will charge higher rates to people with bad credit.

Improving your credit score takes time. A few things you can start doing today are:

  • Don't open any new credit card accounts.
  • Pay off smallest balances first.
  • Keep a daily, weekly, and monthly log of expenses.
  • Consider foregoing luxuries to save money.

Your Choice of Insurance Providers

Not all companies offer competitive rates. Companies take additional factors into account, like their financial situation or their desire to expand into new markets.

Talk to a local agent or research online to find the most competitive auto insurance rates for your needs.

The Industry Overall

Auto insurance is not a profitable line of business for most companies right now. Claims numbers are on the rise, largely because of distracted driving (people using their phones while driving).

Also, vehicles are more technologically advanced today, which makes repairs more expensive. Insurance companies are raising rates to accommodate the increased frequency of expensive claims.

Now you know the factors driving up your auto insurance premiums. Read on to find ways to reduce them.

Never text while driving. If you must make calls, consider a hands-free headset or Bluetooth connection to use while driving.


Insurance companies offer many discounts for qualified drivers. The amount depends on the type of discount.

Multi-policy Discount
Many companies offer a price break if you "bundle" different kinds of coverage.

  • Home Owners: You probably have homeowners insurance already. You can combine home and auto insurance with the same company for a discount as high as 15%.

  • Renters: You can protect your contents with a renter's policy.

Renter's policies generally start at $125-$150/year for minimum contents coverage. You might save more money than that on your auto policy with the 15% multi-policy discount.

Payment Discounts
Companies may also reward you based on how you pay your premiums.

  • Pay in full: Many companies offer a large discount if you pay up front for the entire term. This can be as high as 20%.

  • EFT: You may also earn a discount if you pay automatically from your bank account.

Paperless Billing
Save on paper and receive your policies and bills through email.

Claims-Free Discount
This is an extra reward if you've gone a few years without having a claim.

Telematics Devices
These small devices track certain aspects of your driving, such as acceleration and braking. There is no penalty for bad driving, but the discount can be between
5% and 20% per vehicle.

Talk to your agent to make sure you are getting all the available discounts on your auto policy.

A Heavily Regulated Industry

The insurance industry shares some similarities to banking.

  1. Traditional banks and insurance companies are a for-profit business. They both want to make money.

  2. Both are heavily regulated to help protect the consumer.

  3. They CANNOT set their own interest rates.

Insurance is regulated by each state's department of insurance (DOI). The DOI regulates and oversees all insurance activities in the state, but they don't set what rates are exactly.

Each state's department of insurance is ultimately overseen by an Insurance Commissioner. This position is appointed by the state's governor. There are no strict party requirements or length of term requirements.

Is auto insurance profitable?
An insurance company doesn't make money if they pay out more money in claims than they bring in through premiums. As such, the majority of auto insurance companies do not make much money, if any at all.

Claims are more frequent today, in large part because of distracted driving and more advanced (and expensive) vehicles.

Bottom Line

Many factors determine your auto insurance rates. But you don't have to be stuck paying high auto premiums forever.

Start taking the necessary steps to lower your auto insurance premiums back to a competitive level. But remember, as the cost of living rises in every other aspect of life, so does the cost of insurance.

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