Why Is Car Insurance So Expensive? Rates Explained (2024) (2024)

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Let’s get into the details of why your car insurance could be expensive.

#1 You’re a High-Risk Driver

One of the main reasons car insurance is so expensive is if insurance companies see you as a high-risk driver. This may be because you have recent at-fault accidents, moving violations or convictions like a DUI on your insurance record.

To car insurance companies, people who have violations like these on their records are more likely to get violations in the future. Since car insurance companies cover damage and lawsuits from accidents for customers, it makes sense that they charge high-risk drivers higher rates.

Car Insurance Rates by Accident and Violation

Having an accident or moving violation on your record can increase your rates drastically depending on the situation. The average driver pays $409 more per year if they have a minor speeding ticket on their record and $1,461 more per year if they have a DUI, according to our estimates.

Below, you can see how different types of speeding tickets, violations and accidents affect annual insurance rates on average compared to a clean driving record.

How Long Do Violations Stay on Your Driving Record?

Small or moderate accidents and violations stay on your driving record from two to five years depending on the state. Serious convictions stay on your record for longer. A DUI can stay on your record for five years, 10 years or even indefinitely depending on the state. However, it won’t affect your insurance costs forever.

Most insurance companies look at your driving record over the past three to five years. So your insurance history is shorter than your driving history. If you’ve driven responsibly after a major incident, keep checking car insurance quotes each time your policy is up for renewal until you see rates go down.

#2 You’re a Young Driver

Your age may be another factor in why your car insurance is so expensive. Our estimates show 18-year-olds pay an average of almost $5,000 per year for individual insurance policies. Auto insurance premiums are most expensive for teens and young adults because these age groups have a higher risk of car accidents and violations.

Average Car Insurance Cost by Age

#3 You Live in an Area With More Expensive Insurance

The area you live in can be another reason why car insurance is so expensive. Densely populated areas have higher rates of accidents, traffic violations and theft, so the average cost of car insurance is higher. Similarly, if inclement weather or a natural disaster damages a large number of vehicles in your area, companies can raise rates to cover increased claims.

Different states also have different car insurance requirements and rates of claims. States have differing levels of uninsured drivers as well, and insured motorists pick up the tab. That raises overall costs.

States With the Most Expensive Car Insurance

According to our research, these are among the most expensive states for car insurance on average:

• Michigan
• Florida
• Louisiana
• New York
• Massachusetts
• Connecticut

States With the Cheapest Car Insurance

On the other hand, states like these have cheaper average car insurance prices:

• Maine
• North Dakota
• Idaho
• Ohio

#4 Your Car Is Expensive To Insure

Does your car have a racing-spec engine? An array of high-tech features? A luxury price tag? If so, you’ll pay more for car insurance. Cars with the following attributes cost more to insure:

• Expensive price tag
• Advanced tech features
• Sport design or functionality
• High likelihood of theft

Generally, luxury cars, sports cars and full-size pickup trucks are the most expensive vehicles to insure.

#5 You Have Poor Credit

Car insurance can be expensive if you have a poor credit score. Most states allow insurers to use credit-based insurance scores, and companies charge people with poor scores higher premiums. This is because poor credit history has been associated with a higher likelihood of filing a claim.

#6 You Have an Expensive Car Insurance Company

Lastly, it’s possible for you to have an expensive car insurance company compared to other options. According to our estimates, average rates for good drivers range from about $1,000 per year from the cheapest companies to over $2,000 per year for the most expensive ones.

You may be surprised to find lower car insurance premiums with a competitor if you reach out for quotes from multiple companies.

Car Insurance Companies Change Rates Often

Car insurance providers change their base rates annually or even biannually. Your rates may change even if there’s nothing different about your situation. It can seem like rates always increase, but there are cases where rates go down as well.

For example, many companies gave customers breaks on their premiums during the COVID-19 pandemic. At other times, a judge may rule that a company’s insurance rates are too expensive for a given area or state, and the company may decrease its rates.

In some cases, your recent driving record may be so bad that insurance companies offer astronomically high rates or even turn you down for car insurance. But if your state still requires you to have car insurance, what do you do?

This is why assigned-risk pools exist. Each state requires companies to insure some high-risk drivers they would normally turn away under assigned-risk pools. This way, high-risk drivers can find coverage and companies can split the risk.

Some states require you to be turned down by one or more insurance companies before you can get coverage through the assigned-risk pool. Others allow you to enter the pool if you can’t afford the rates you’ve been offered. In any case, you can usually ask any licensed insurance agent about the assigned-risk pool to get started with an application.

While you can’t change every factor that car insurance companies look at to determine your rate, you can find lower rates in several ways.

• Shop around: This is one of the simplest ways to find a lower car insurance rate. We recommend comparing rates from at least three companies each time your insurance policy is up for renewal. Your rates go down when violations fall off your insurance history, too.
• Choose your car wisely: If you’re shopping for a car, consider a well-maintained used car that has good safety features. This will fetch the most affordable rates.
• Try usage-based insurance: Usage-based programs like Progressive’s Snapshot® or Geico’s Drive Easy track your driving in real time and award discounts. Using these can be a great way to get a rate reduction if you’re a safe driver.
• Try mileage-based programs: Some companies offer pay-per-mile insurance that can be affordable if you have a short commute or don’t drive very often.
• Take a drivers education or defensive driving course: Your company may offer car insurance discounts for taking approved driving courses.
• Change your coverage: You can downgrade your insurance coverage and limits to save money. State minimum liability coverage is the cheapest option available.
• Change your deductible: If you have full coverage (comprehensive and collision coverage), having a higher deductible will reduce your car insurance rates, and vice versa.
• Improve your credit: You can find better rates by improving your credit over time. Having good credit will help you avoid high premiums.

Expensive Car Insurance Alternatives

Not all car insurance companies offer the same rates, coverage options or levels of customer service. Our top picks for affordable coverage include State Farm and USAA.

State Farm: Best Customer Experience

State Farm is the largest car insurance company in the country, but that’s not the only thing it has going for it. Our research shows average rates from State Farm are about 21% cheaper than the national average. State Farm also offers a good student discount of up to 25% and a usage-based program called Drive Safe & Save^TM. In our survey of nearly 7,000 car insurance customers, State Farm received an overall satisfaction score of 4.2 out of 5.0.

Keep reading: State Farm insurance review

USAA: Best for Military Members

USAA offers some of the best rates and customer service in the industry, but it’s only available to members of the military, veterans and their immediate family. In our survey, USAA received a customer satisfaction score of 4.3 out of 5.0. We also found that USAA’s average rates are about 33% cheaper than the market average. If you qualify for coverage with USAA, it could be the cheapest option for you.

Keep reading: USAA insurance review

Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.

Here are the factors our ratings take into account:

• Cost: Auto insurance rate estimates generated by Quadrant Information Services and discount opportunities were both taken into consideration.
• Coverage: Companies that offer a variety of choices for insurance coverage are more likely to meet consumer needs.
• Reputation and experience: Our research team considered market share, ratings from industry experts and years in business when giving this score.
• Availability: Auto insurance companies with greater state availability and few eligibility requirements scored highest in this category.
• Customer experience: This score is based on volume of complaints reported by the NAIC and customer satisfaction ratings reported by J.D. Power. We also considered the responsiveness, friendliness and helpfulness of each insurance company’s customer service team based on our own shopper analysis.

Our credentials:

• 800 hours researched
• 45 companies reviewed
• 8,500+ consumers surveyed

*Data accurate at time of publication.