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Cars are great, but car insurance can be a pain.
Many people are paying more for their car insurance than they need to.
This article will help you understand why your car insurance is so expensive and what you can do to lower your rates.
Stop asking yourself, “why am I paying so much for car insurance?” and use this information to save more of your hard-earned money.
After all, every penny saved on your car insurance is one more penny you can put toward something you actually want to buy.
So, Why is Your Car Insurance So Expensive?
Car insurance pricing is complicated. There are a lot of factors that go into the price of your policy. Every state has its own insurance laws, and every company has their own calculations.
That means the cost of your insurance will be calculated differently from your friend that lives one state over.
However, despite the lack of uniformity on insurance laws, there are some factors that affect nearly everyone’s car insurance price. These factors include:
· Your driving record
· The type of car you own
· Where you live
· Your age
· Your credit history
As you can see, these are some pretty diverse factors that can affect your car insurance premiums.
We’ll go over each one before giving you some tips on how you can lower your insurance rates.
1. Your driving record
Your driving record is, far and away, the biggest factor in the cost of your car insurance. If you have a clean record with no accidents, you’ll pay much less than someone who has an at fault accident on their record.
But it isn’t just accidents that matter. Your insurance will also go up if you’ve committed a moving violation in your car.
Moving violations are things like speeding tickets, reckless driving, failure to maintain your lane, driving too fast for the weather conditions, and so on.
These tickets tell the insurance company that you’re more likely to be in a crash and, thus, more likely to file a claim that results in the company paying out. That means you’re going to get charged more for your insurance.
2. The type of car you own
The type of car you drive will also have an impact on your insurance. Wallet Hub conducted a study that found that drivers with a car valued at $36,000 pay in excess of $1,000 more for auto-insurance per year than drivers who own a car valued at $9,000.
However, the cost of the car in question isn’t the only factor. Insurance companies like safe cars. And by “safe cars” we mean safe for everyone, not just the driver and passengers.
Cars like SUV’s will cost more to insure because of the damage they can do to other people and property. Insurance companies also charge more for sports cars and cars that lack added safety features.
There’s a good reason that these cars cost more to insure. Studies show that these cars are more likely to be in an accident.
Any accident these cars are in will likely cost more to the insurance company than if the car involved were a “safe” model.
3. Where you live
According to Kiplinger, simply moving across state lines can cause your car insurance price to double or to be cut in half. That’s because different states have different insurance laws.
Additionally, different states have different driving laws and driving statistics. Insurance companies use that information to determine how likely they are to pay on out a customer that lives in a given area.
If you live in a state with a high rate of accidents, your insurance will be higher than a state with few incidents.
4. Age of driver
The age of the drivers on your insurance policy is another huge factor that determines the prices of car insurance.
Younger drivers are statistically more likely to be in accidents and crashes. Additionally, the accidents that younger people get into tend to be more expensive.
This answers the common question “why is car insurance so expensive for 18-year-olds?” The reason is that younger drivers don’t have as much experience controlling a car.
Additionally, young people are prone to greater risk-taking. All of this adds up to mean that younger drivers pay a higher price for insurance.
5. Credit history
The final major factor we’ll look at is credit history. It’s important to remember that when an insurance company gives someone a policy, they are taking a risk.
The company is betting that they’ll make more on the driver’s payments than they’ll lose on any claims.
Your credit history and credit report tell car insurance companies how likely you are to pay your bill on time.
The lower your credit score, the bigger the risk you are to insurance companies for non-payment. That means the insurance company needs to charge you more to balance the risk on their end.
How to Lower the Cost of Car Insurance:
Now that you’ve got a better idea of why your car insurance is so expensive, we’ll go over some things you can do to reduce your costs.
You can try all of these strategies, or you can pick and choose the tactics that will work best for you.
Regardless of which you attempt to pursue, we recommend talking to your insurance agent or representative to find out what kind of impact these steps will have on the cost of your car insurance before you make any commitments.
We’ll Look At the Following Ways to Lower the Cost of Your Car Insurance:
- Driver Training
- Good Grades Discounts
- Getting on your parent’s insurance
- Your choice of car
- Boosting your credit score
- Talking with your insurance company
1. Driver training
One of the most surefire ways to lower the cost of your insurance is to take a refresher driver’s course. Every state offers these classes, just make sure the one you pick is recognized by your insurance company.
Studies find that people who take retraining classes are less likely to be involved in accidents. Fewer accidents mean a lower risk that the insurance company will have to pay on a claim, and that translates into lower rates for you.
Many states will also let you use driver education and training classes to remove points from your license. These classes can improve the driving record your insurance company uses to price your policies.
On the whole, a training course will usually pay for its self within 6 months to a year for most drivers.
2. Good grades discount
Almost every insurance company offers a “good grades” discount. Insurance companies love to offer customers discounts based on their performance because it gives insurers a larger, more accurate pool of data to use while estimating potential risks.
Insurance companies have found that people with good grades in high school and college are less likely to get into accidents during those years.
That means they’re willing to pass some of their savings on to you! If you’re in school and your car insurance is expensive, try hitting the books instead of the gas pedal, and you could see a sizable discount.
3. Get covered by your parents’ insurance
Another option for saving money is to get on your parents’ insurance policy. It’s important to note that you can only do this if you’re living at home or are attending school.
Getting added to your parents’ policy can save a driver in their teens or early twenties thousands of dollars per year.
This is because you benefit from your parent’s age, experience, driving record, and credit score. This is one of Dave Ramsey’s favorite methods to lower the cost of insurance for teens.
4. Choose the right car
Choosing the right car is another way to lower the cost of your insurance. Remember, insurance companies charge more for fast, expensive, and unsafe cars compared to slower cars with lots of safety features.
You should research what kind of insurance class a car is in before you purchase it. That way, you can get a good idea of what your insurance rates will be before you buy the car.
5. Boost your credit score
Boosting your credit score is another sure-fire way to lower the price of your car insurance. A good credit score will lower the cost of other financial products, as well.
You can do this with credit repair services or by making consistent on-time payments to companies that report to the credit scoring agencies.
A higher credit score shows the insurance company that they can trust you to pay your bill. The result is less risk to them and thus a lower monthly bill for you.
6. Talk to your insurance provider
The final option is to ask your insurer what you can do to lower the cost of your insurance. Most companies offer programs like mobile app tracking and other options that you can use to reduce your rates.
Insurance companies want you to avoid accidents, so they’re willing to give you large discounts if you can prove you’re a safe driver.
Get Cheaper Car Insurance
As you can see, there are a lot of factors that go into how car insurance is priced.
However, that means there’s a lot of ways you can take action to lower the cost of your insurance.
Try some of these steps and see how low you can get your insurance rate to go!