Why Your Car Insurance is So High & How to Reduce It

Car Insurance

Did you take a look at your car insurance bill lately? As you look at the amount you owe on your car insurance, you will probably have one main question: Why is my premium so high? While premiums have risen from 2010 to 2019, auto insurance costs dropped by almost 5% in 2020 when the COVID-19 pandemic caused people to stay home. Here are some reasons your auto insurance premiums are so high, and how you can stop them from putting a strain on your budget.

Reasons For Expensive Car Insurance

Driving Record

Your rates will go through the roof if you have a history of speeding or DUIs. However, a clean driving record can actually help lower your rates. Insurance companies offer discounts for safe-drivers and good drivers. To lower your rate, check to see if you are eligible.

Insurance Claim History

Even though they are there to receive claims, Insurance companies hate it when you file too many claims, especially large claims. Your premiums will rise if you have any accidents, including a few fender benders or totaling too many cars. To avoid increasing your premiums, consider paying out-of-pocket for repairs that are smaller if you can.

Car Insurance

Distance You Drive To and From Work

Your rates will rise if you commute long distances regularly or travel on dangerous roads. Insurance companies will ask where you work when you apply. You may be saving money on housing costs by driving to work, but it can also increase the cost of your car insurance. Although this is not something you should move over, it might be something to think about if you are already planning to move.

Car Insurance

Credit Score

Car insurance will cost you more if your credit score is below 600. Luckily, you can improve your credit score in the future! While it may affect your insurance rate, credit scores are not an accurate indicator of your wealth. It’s not something to worry about. It’s basically a number that indicates your ability to borrow money and pay it back. It doesn’t matter how much you have in your bank account, how much you save for retirement, or your income.

Car Insurance

Insurance Payment History

Your premiums could rise if you have not had enough coverage. If you have a car, it is mandatory to have auto insurance. You should not drive a vehicle that doesn’t have car insurance with it. To avoid paying higher premiums, ensure you have car insurance for as long as your car is in use!

Where You Live

Your premiums will go up if you live in a large city or in an area that is prone to traffic accidents. Insurance companies consider the area’s crime rate, number of claims, and population density. Your insurance rate will rise if any of these factors are high.

Car insurance

Age & Gender

Insurance companies consider gender and age when determining insurance rates. Higher rates are usually offered to drivers under 25 years old and those over 75 years old. However, some states such as California, Hawaii, and Massachusetts have all banned insurance companies using gender and age to set premiums. 

car insurance

Type of Car You Drive

While a luxury car like a Tesla or Porsche might be fun to drive, they can increase your insurance rates. Even if your car isn’t a luxury or sports car, it will cost you more to insure cars with high-end parts or expensive vehicles.

Insurance prices can also be affected by vehicle safety. Insurance premiums are lower for cars that pass safety tests. When you shop for a car, make sure to check the safety ratings. Ask your licensed insurance agent about how this might impact your rate.

Type of Policy & Who is Included

If your policy includes teenagers or an elderly relative, the rates will go up. However, some insurance companies offer discounts to those who have good grades and a clean driving record. 

High deductible plans and add-ons will also result in higher premiums. Look at your policy to determine if you really need it. You can reduce your premium if you only purchase the coverage that you actually need. 

 

How to Pay a Cheaper Car Insurance Premium

Pay a Higher Deductible

Your deductible is the amount you pay to repair your vehicle before your insurance company begins paying the rest. A low deductible means that you are allowing the insurance company to take on more risk. While you will pay less for repairs at the moment, your premiums will be higher.

Increase your deductible if you have more than $1,000 saved. A higher deductible will result in lower premiums. This is because you are taking on more risk (usually around a few hundred more dollars per year), but there is money in your bank that can cover you if you are in an accident. You don’t want to pay premiums for risks that you cannot manage yourself, like if your car is totaled.

Look at the Types of Coverage You Don’t Need

It’s now time to examine your policy and determine what type of coverage you actually pay for. You should have certain types of insurance in place for your car. These include collision, comprehensive, and liability coverage. These three types of insurance provide complete coverage, from injuries and damage caused by others to theft or damage to your car.

There are many types of coverage that you can drop from your policy which will reduce your premiums, including extended coverage, guaranteed auto protection, and PIP (Personal Injury Protection).

Look Into Bundling Insurance Policies

If you have multiple types of insurance, car insurance and home insurance for example, you can bundle your insurance by getting rid of one or both of the policies and purchasing insurance through one provider. This is a great way to save money on premiums and manage your policies more efficiently. If you have multiple policies, it is less likely that your insurance company will drop you.

Compare Quotes From Different Insurance Companies

When was the last time you went “shopping” for car insurance? Probably when you purchased your car, a year ago, or even longer! It’s possible to save hundreds of dollars by comparing rates at least once a year. There’s nothing to lose, and you could potentially make hundreds of dollars!

Conclusion

It seems easy to get insurance quotes online. Who doesn’t love the convenience?! However, you are probably missing out on some savings if you go this route. Many people make the error of working with an agent that can’t or won’t compare quotes from different insurance companies. You need someone who is dedicated to getting the best deal for you, and not for their insurance company. Call or meet with a local insurance broker who can help you find the best coverage and rates. This will ensure that you get the best auto insurance deal possible!

Why Your Car Insurance is So High & How to Reduce It

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