Updated March 10, 2021

Why is My Car Insurance So High

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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 car insurance renewal offer.

No surprise: rates have gone up again. Each year, car insurance premiums seem to increase.

But why?

Insurance companies look at data to find where most claims happen and the type of people involved. The places and groups that have a high number of claims get higher rates.

If you fall under a high-risk group, your auto rates will be higher than someone who is in a low-risk group. Find out why your insurance is so high and see what you can do to lower it.

How do you know if you're paying too much for car insurance?
The best way to get the lowest rates is to shop around and compare prices. You won't know if you're paying too much unless you know what competitors are offering. Compare prices once a year to find the best rates.

Zip Code

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

But you don't have to live off the grid just to save on insurance. A different zip code in the same city could have different rates. Some areas are more prone to accidents. These are the places with higher rates.

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

Did you know? In California, San Luis Obispo County has 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 populated parts of the state.

Are you a single guy under age 26? That's might be why your insurance costs so much. See how these personal details factor into auto insurance.

Age and Gender

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

Statistically, young drivers age 16-19 get into more car crashes than any other age group. But there are other factors, too:

  • Low or no credit score
  • Lack of driving experience
  • Can't afford multiple policies (which brings discounts)

Car insurance also costs more for young men. Young male drivers are riskier drivers and get into more serious car accidents. As you get older, gender plays less of a role in your car insurance rates.

Even marital status has an effect on auto insurance rates. Insurance companies consider married people more responsible and less risky to insure. That means lower rates for married folks.

Consider staying on your parents' insurance policy for as long as you can. You can pay them directly for your portion of the bill and save money.

At what age does car insurance go down?
Insurance rates start to go down at age 25, but only if you've kept a clean driving record. If you have a history of filing a lot of claims, that will drive your insurance up.

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 your claims and driving history to determine what kind of driver you are.

These categories impact how much your rate will increase with a new claim.

  • High-Risk Drivers
    If you have multiple past claims or a bad driving record, your rates could increase by 10% to 20% with a new claim.

  • Low-Risk Drivers
    Your insurance still might go up after a claim, but not as much as it would 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, you'll likely see an insurance premium increase. But even not at-fault accidents can increase rates in some states.

Many companies offer accident forgiveness programs that guarantee one accident won't affect your rates. You can qualify if you:
  • 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, you'll need to go 3-5 years without filing a claim. This is the time it'll take for your past claims to drop from your insurance.

Driving Record

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People with a lot of activity on their driving record are involved in more accidents. This activity includes:

  • Multiple speeding tickets
  • Seatbelt violations
  • Running red lights
  • Other infractions

Rates are much higher for people with multiple violations. Many insurance companies won't take you as a new customer if you've had 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 get an SR-22 on your insurance policy.

An SR-22 is a certificate that the insurance company sends to the state. It proves that you have insurance and are in compliance with state requirements.

SR-22s aren't offered by every insurance company. The certificate itself doesn't cost much money. But it shows that you have multiple claims and violations. This makes you a very high-risk driver, which brings high premiums.

Even if you do everything right, you might still be overpaying for auto insurance. Stick around to the end to learn how to get the lowest rates.

Insurance History

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

Not having insurance puts you in the high-risk category. Insurance companies like safe, consistent drivers. If you don't have an insurance history or you have gaps in insurance, your rates will likely be higher.

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

Type of Car

Some car types are also considered a higher risk to insure. Sports cars are more likely to be involved in accidents, so you'll pay a higher insurance premium. New, advanced cars are more expensive to repair. This makes them more expensive to insure.

Safe cars with features like a security system and anti-lock brakes can also lower your insurance. Car size matters too. Larger cars offer better crash protection and are cheaper to insure.

The cheapest cars to insure include:

  • Honda Odyssey
  • Toyota RAV4
  • Subaru Outback
  • Jeep Wrangler
  • Ford Escape

If you have multiple cars on your policy, most companies will give you a multi-car discount. It can actually be more expensive to insure one car than to have two on the same policy.

If you fall into the high-risk category, driving an older car can greatly reduce your rates. Older cars let you carry liability-only coverage.

Coverage Options

The most expensive part of any auto insurance policy is usually coverage for damages to your car. These coverages are known as comprehensive and collision. Collision tends to be the most costly.

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

  • Newer Cars: Consider raising your comprehensive and collision deductibles to $500 or $1,000.

  • Older Cars: Drop both comprehensive and collision and just carry liability.

Avoid lowering your liability limits. Legally, you need to carry only the state minimum. But these limits aren't enough if you are involved in a major accident. The amount you'd save on your premium isn't worth having to pay tens of thousands of dollars in damages out of pocket.

Some factors for car insurance pricing aren't so obvious. Do you pay your bills on time? Your answer could affect your car insurance rates.

Credit Score

In most states, auto insurers consider parts of your credit score for what's called a credit-based insurance score. The score looks at your payment history, outstanding debt, credit history length and more to determine whether you'll be risky to insure.

Statistically, people with a bad credit history are more likely to get in an accident. 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.

Distracted Driving

Do you text or use your phone while driving? Even if you personally don't, you probably know people who do. This behavior raises auto insurance rates for everyone.

Distracted driving has become more common over the years. The majority of Americans now own a cell phone. Many people like to stay plugged in, even when driving. It's risky behavior, which means—you guessed it—higher rates.

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

Believe it or not, there is a bright side to all this expensive insurance talk. Here are some ways you can get cheaper car insurance.

How to Lower Your Car Insurance

To get the lowest car insurance rates, shop around and compare prices. Companies change their rates all the time. Comparison shop every year to get the best rates possible.

Do you feel your car insurance is fairly priced?

Remember to take advantage of discounts, too. Here are a few you could qualify for:

Multi-Policy Discount
Many companies offer a price break if you bundle different kinds of coverage. Other coverages you can bundle with car insurance include:

  • Home
  • Renters
  • Condo
  • Life
  • Motorcycle

Combining coverage with the same insurance company can get you a discount as high as 15%. It's an easy way to save with insurance policies you already have.

Multi-Vehicle Discount
Insure multiple vehicles (cars, motorcycles, boats, etc.) with the same company to save some cash. Some companies offer savings up to 25% off.

Payment Discounts
Some companies reward you for how you pay your premium. You can get a big discount if you pay for your entire policy up front. Discounts can be as high as 20%.

You can also get a discount if you set up automatic payments from your bank account.

Paperless Billing
This small step for the environment can save you money, too. Go paperless and receive your policies and bills through email.

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

Safe-Driving Apps
Most major car insurance companies have programs that give you discounts for good driving behavior. An app or a small device in your car tracks certain aspects of your driving, like acceleration and braking.

There is no penalty for bad driving, but the discount can be between 5% and 20% per car.

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

What Experts Say

CreditDonkey interviewed insurance experts about how to get the best rates. Here's what they said:

Bottom Line

As the cost of living rises in every other aspect of life, so does the cost of insurance. Many factors determine your car insurance rates. But you don't have to be stuck paying high insurance premiums forever.

Remember to get quotes from different auto insurance companies before you commit to one. Searching for discounts and comparison shopping every year will get you the best rates possible.

Write to Andrew Flueckiger at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

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Do you feel your car insurance is fairly priced?
31% Yes, it's fairly priced
69% No, my rates are too high
Source: CreditDonkey
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