Next to purchasing a home, a car is probably the most expensive personal investment you’ll make. While home insurance is optional, in most states, auto insurance is a requirement for drivers. But why does auto insurance have to be so expensive?
Here are some reasons your car insurance costs so much, with some additional ideas on how you could lower your insurance rate.
You’re Too Young
Younger drivers pay much more for car insurance than older drivers. The main reason for these high rates is that young drivers are statistically more likely to get into car accidents that result in costly claims for insurers.
One of the best ways for younger drivers to lower their premiums is to share a policy with an older family member. By doing so, that individual could reduce their overall insurance bill by 58%. Younger drivers could also qualify for good student discounts or take additional training courses to bring rates down even more.
Young men are particularly likely to pay a lot for car insurance. A study from Value Penguin found that though a 20-year-old man pays about 16% more than a woman of the same age, the difference evens out as drivers get older. Older women actually pay slightly more than men of the same age.
You Have a Low Credit Score
If your credit score is poor or not yet built up, you may be seen as a “high-risk driver.” Your credit score could impact your insurance regardless of your driving record, age, or car. By boosting your credit, you may be able to save on your insurance costs.
You’re Paying for Full Coverage
Typically a new car owner should get full coverage for their vehicle. However, as your car depreciates in value, full coverage might not be worth it anymore (especially if you maintain an excellent driving record). Comprehensive and collision insurance cover the cost to repair or replace your vehicle if it is damaged, less your deductible- which is the amount you have to pay out of pocket before your coverage kicks in. Policies that include high liability limits as well as comprehensive and collision coverage with low deductibles are particularly expensive.
You Drive Less Than Your Insurer Thinks
Accuracy counts when it comes to estimating your annual mileage. If you overestimate how much you drive, it could cost you. The mileage you previously submitted to your insurance provider may have changed since you picked your plan. Take a moment to estimate how much driving you’re currently doing. Give your insurance provider a call and give them the updated figure. A few minutes of calculating could save you hundreds on auto insurance.
You Live in an Accident-heavy Area
There are lots of factors that impact insurance rates in a state, including minimum coverage amounts, the number of uninsured drivers, and even how well-maintained the roads are. If you live near a congested road, highway, or shopping area, you’ve likely seen a few accidents. Your auto insurance provider may increase your insurance rate if you live in an accident-prone area. Remember to keep your insurance company updated if you move to a rural or less busy area since it may end up lowering your car insurance costs.
More Ways to Save on Insurance
If your car insurance is too expensive, there are a number of steps you may be able to take to lower your rate. The most important thing you can do is shop around for quotes from multiple insurance companies. Just because one company is charging you high prices, doesn’t mean you won’t be able to find a great price elsewhere.