What's the Real Cost of Auto Insurance?

What's the Real Cost of Auto Insurance?
What's the Real Cost of Auto Insurance?
| Nov 16 2022
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Your Guide to Rising Auto Insurance Costs

Auto insurance can be quite expensive depending on who you are and where you live, but it’s an unavoidable cost of driving. Fortunately there are ways to reduce your insurance costs to free up money for other things (the holidays are right around the corner, after all!)

Here’s the real cost of insurance and what steps you can take to lower your insurance payments.

What things determine the cost of auto insurance?

While insurance rates may seem mystifying at times, there are a number of metrics and calculations that go into determining an individual’s insurance premium. Insurance companies look at a number of factors when determining what insurance rates to offer. While some of these factors are within your control, others are not. Here are the top considerations for insurance rates.

  1. Your Age. Your age is a huge factor in what you will pay for insurance. Young drivers typically pay the most, while middle aged drivers tend to pay the least. In fact the average amount paid by a teen driver compared to a 50 year old driver is over $5,000. By the time you are 20 this will affect your rate less, and by the time you are 25 your age will not matter as much.
  2. Your Driving History. Your driving history plays a big role in your insurance rate. If you have accidents in your past or you have more than a few tickets, you can expect to pay more for car insurance. Insurance companies can see your driving history for the past seven years when they are determining your rate.
  3. Your Credit Score. This may not immediately come to mind when you think of insurance rates, but data shows that people with higher credit scores tend to get in less accidents. Therefore if you have a good credit score you will most likely be offered a better insurance rate.
  4. Where You Live. Your location affects your insurance rate in two ways: your state’s laws and your zip code. Each state requires different levels of coverage, with some requiring more coverage than others. Each zip code will also have different rate adjustments to account for a number of factors including: high traffic areas, flood zones, high theft areas, wildfires, and more. Insurance tends to be higher in cities than in rural areas.
  5. Your Gender. Insurance companies view female drivers as less risky than male drivers, therefore females tend to get lower rates. On average a teen boy will pay over $750 more per year than a teen girl. 
  6. Your Insurance and Claims History. Lack of continuous insurance coverage is a bad sign for insurance companies and it can make you a riskier customer. Additionally, your claims history affects your insurance rates as well. This includes claims filed against you as well as claims you file yourself. A history of multiple insurance claims will raise your insurance rates. 
  7. Your Vehicle. More expensive cars are more expensive to insure. If the insurance company needs to replace a more expensive car, they need to recoup the costs.
  8. The Amount You Drive. The less you drive, the less your insurance will cost.
  9. Your Coverage Level. The amount of coverage you select will have a huge effect on your insurance premium. Covering yourself with the state minimum will be much cheaper than a full comprehensive coverage.

Why is car insurance so expensive lately?

If your insurance seems particularly high lately, it most likely has to do with on of the following:

  • Your location. Did you move from a rural area to a more populated one? A change of address can trigger an increase.
  • Your credit score. If your credit score has taken a hit lately, it may have caused your insurance company to raise your rates.
  • Your driving record. If you have gotten into an accident lately or have been issued a ticket or two, it may have resulted in an automatic increase. But while accidents stay on your record forever, insurance companies only have access to your last seven years of driving when determining rates.

If none of these apply, it might be possible that you simply have an expensive insurance company. You can always call around and compare rates if you feel like you are overpaying.

How can I reduce my insurance payments?

When looking for car insurance, it’s very important to shop around. Compare rates and policies with multiple companies before committing to an insurance company (be sure to read customer reviews too–if companies have a reputation for trying to weasel out of paying out claims, run the other way).

But on top of that, there may be additional discounts out there that may help you reduce your insurance payments if you feel like you are overpaying. Here are some of our top tips for reducing your cost of insurance.

Determine if you are eligible for any driver-based discounts. 

Insurance companies offer discounts if you are a student, if you are in the military, if you are elderly, and they even offer discounts for certain professions. Take a close look at your policy to determine if you are eligible for any additional savings.

Change your coverage.

The higher your level of coverage is, the more you will pay for insurance. Try dropping your amount of coverage if your premium is too high for you to keep up with. State liability insurance is the minimum amount you can legally carry.

Take a defensive driving course.

Taking a class that is offered by an accredited driving school can help you lower your rates. This is an especially good idea if you have an accident on your record.

Look into usage-based or mileage-based discounts

Many insurance companies offer discounts for low mileage. Additionally, many companies have usage-based programs that monitor your driving habits (the speed you drive, how you brake, and what time of day you drive). 

Improve your credit score.

Working to improve your credit score can help reduce your insurance rates. 

  • Request a copy of your credit report and check for any errors.
  • Commit to making full, consistent, on time payments.
  • Request higher credit limits to improve your credit utilization ratio.
  • Get a debit card that can help build credit.
  • Refinance your car loan (refinancing your car loan can help you get more manageable payments, which in turn can help your credit score)

That’s everything you need to know about the real cost of auto insurance.

Insurance is expensive, but shopping around and taking advantage of discounts when you can will help keep the costs under control. And if you are looking to save money in your car budget, think about refinancing your car loan. Refinancing your loan can save you a lot of money, so don’t wait! Get in touch with Auto Approve today!


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