Why Is Car Insurance So Expensive?

For most people, the amount paid for car insurance is pretty up there with the mortgage every month. According to insurify.com, Americans pay an average of $1,707 for car insurance every year, which is not at all cheap.

Motor insurance is also affected by several other features, and they can easily kick up the premium that you pay every month. If you’ve often felt like paying for your car premium drains your cash flow, here’s all the information you need to know.

In addition, you’ll also learn the top way to save precious dollars on car insurance.

First, a crash course on what car insurance is and its cost in the US.

What is car insurance?

Motor or car insurance is a contract between an insurance company and car owners. This contract is where you agree to pay a monthly amount, or the premium, to the company in exchange for their protection against loss, damage, or accidents that can cause financial loss to you.

Depending on the auto insurance company, you can insure your car against physical damages to the car, bodily damage, medical bills, or funeral expenses due to an accident. Some auto insurance also covers theft, damage to the car by natural disasters or collisions, etc. 

Researching motor insurance costs can make a big difference in getting the best auto insurance policy. In this regard, best Auto Insurance Dynomoon and Bellas Auto Insurance- Overview, Products, and Reviews are great resources you might want to check out. 

How much is car insurance in the US?

According to Bankrate’s latest data, the US car insurance cost is $1,771 for full coverage as of October 2022. When you break it down, the monthly premium is about $148 per month. 

On the other hand, the minimum motor coverage is $545 per year, which comes out to about $45 monthly. 

Shopping around for car insurance costs and comparing them is the best strategy to get the best policy, so you don’t overpay for your car. The article “Del Toro Insurance- The assurance to be well insured has a lot of in-depth information you can use. 

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Why is car insurance so expensive?

If you think that your car insurance premium is too expensive, especially when you compare it to the national average, here are the top five reasons why:

The insurance company

Where you get the insurance for your car is one of the primary reasons why the insurance premium can get very expensive. 

For instance, Allstate car insurance is the most expensive at $2,438 for full coverage. When you break it down, the monthly premium you will pay for your car is $203. This figure is pretty high, especially compared to the national average of $876 per year or $73 monthly, which is a lot of difference. 

Auto insurance companies such as USAA offer $1,209 per year or $101 per month for full coverage. 

Your age and gender 

If you are a teen or so and own a car, your car insurance premium can also be a lot higher than someone in their 60s or 70s. According to one data, if you are a 19-year driver, the yearly premium for full coverage is between $3,819 and $4,440, depending on whether you are female or male. 

By contrast, if you are in your 70s, car insurance costs per year can be between $1,729 and $1,755, depending on whether you are female or male. 

Comparing these data, younger car owners pay as much as 15% more than older ones. In addition, male drivers also pay a higher premium for their cars since they are involved more in fatal, alcohol-induced, and speed-induced accidents. 

Your location 

How much you pay for motor insurance will vary greatly depending on location. Regardless of the company, car insurance costs are the lowest in Maine, with about $876 for full coverage. It is $262 annual coverage for minimum coverage. 

At the other end is Louisiana, with a $2,864 yearly average for full car coverage. The minimum coverage in the same state is $807, which is almost the same as the full coverage for a car in Maine. 

The stark difference in full/minimum coverage for car premiums in different states I due to the cost of living expenses, less traffic, and fewer chances of accidents. 

Driving record

Whether your driving record is bad or impeccable is another factor determining the overall cost of your car insurance premium. 

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If your driving record is legally clean, the average monthly premium is $148, which totals $1,771 – meaning you don’t pay extra above the national average. 

However, if you have a speeding ticket, your average motor premium can increase by $367 above the national average. With an at-fault accident record, you can expect to pay $750 more, while with a DUI conviction, you will pay $1,650 above the national average. 

Credit score 

Your credit score is another reason you may be paying high car insurance premiums. 

Most auto insurance companies will set your premium after considering your credit score. This is because insurance companies believe that you are more likely to file claims if you have poor credit scores. 

So if your credit score is less than excellent, you may pay about $3,000 on average for your car. On the other hand, with an excellent credit score, you may get away by paying as low as $1,556.

 

However, it is illegal for auto insurance companies to take credit scores into account while calculating your car insurance premiums in some states. California, Massachusetts, and Hawaii are among them, so make sure you know your rights and do not pay too much for your car. 

5 ways to save your dollars on car insurance

If you are looking to save premiums on your car insurance, online resources are a fantastic source to find all the necessary auto insurance information. Jimins Blog is one such site that offers professional tips to save money on car insurance. 

Reflecting on the top reasons why car insurance is expensive mentioned earlier, here are the five ways to save money on your auto premiums. 

Shop and compare prices 

Shopping around the packages companies offer is one of the best strategies to reduce car insurance premiums. And comparing the auto insurance premiums will help you make the best decision. If you are curious, several online tools and resources are available where you can compare car insurance prices and get helpful information. 

The car insurance market is quite competitive, so they have packages for every budget. So start getting insurance policies from multiple companies, and don’t settle for the first one. 

Share your policy with family members.

If you think your car insurance premiums are increasing because of your age, consider sharing them with an older family member. This will greatly reduce your car insurance costs by as much as 58%. 

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Keep an eye out for discounts. 

Another way to save your precious dollars on car insurance costs is to search for discounts. Most motor insurance companies offer several discounts, including:

  • Student discount for those with a GPA of 3.0 or above 
  • Bundle package discounts when you buy multiple policies 
  • Job/occupation discounts if you belong to a certain organization 
  • Vehicle anti-theft discount when you equip your car with a GPS or other tracker 

Work to improve your driving record 

If you have a speeding ticket, a DUI, or some record affecting your car premiums every month, there are ways to improve it. Enrolling in a defensive driving course, which can reduce the effect of your tickets, is a great way to clean up your records. Another accredited course you can consider is accident prevention. 

Improving your driving record can help reduce your car premiums between 10% and 15%. However, this corrective course is only available in some states, so check for details before proceeding. 

Improve your credit score 

This is obvious, but another way to slash premiums on car insurance is to improve your credit score. One of the best strategies that work wonders for a poor credit score is paying off your bills and debts on time every month. 

Besides, reviewing your credit reports frequently will weed out incorrect entries and reports that can lower your credit score. Improving your credit score helps with your car insurance premiums and is great for your overall financial health. 

 

In this regard, reading up on helpful resources about car insurance and the several options will also equip you with the right information. Jimins Blog has multiple in-depth articles on auto insurance, so be sure to check them out. 

Wrapping up

Car insurance premiums in the US have been steadily rising in recent years, especially in the post-pandemic world. However, if you shop around for quotes, look for discounts, and improve your credit score, you can save significant amounts from auto insurance premiums, monthly or annually. 

Practicing safe driving habits is also a fantastic way to save money and be safe on the road. If you nail the practical strategies above and watch the road while driving, there is no reason to keep paying large sums of money every month for your car. 

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