As of 2021, car insurance costs an average of $1,592 ($133 per month) nationwide. But that's just the average for the lowest risk drivers. If you have higher risks, you will often find that you pay a much higher-than-average cost. Still, even favorable premiums are a cost, and sometimes you might wonder why exactly you are seeing such high rates when you haven't done anything wrong behind the wheel.
When determining your premium, your insurer will look at numerous pieces of data to determine your risk of filing a claim and costing them money. Those who have higher risks of costing the insurer money will therefore usually have to pay more. Here's why.
Who Is More Likely To file An Insurance Claim?
When someone files an auto insurance claim, they are going to cost the insurer money by obligating the carrier to pay them a settlement. Therefore, drivers who have a lot of claims on their record, or who will cost the insurer a lot of money on even one claim, are likely to cost the insurer more money.
Because insurers are for-profit businesses, they have to make sure that they receive enough revenue to be able to continue to pay claims for their clients. Therefore, when they have a client who is at a proportionally higher risk of filing claims, they want to be able to cut that cost risk off at the pass. As a result, they are more likely to charge these high-risk drivers a higher premium. It's as simple as the law of supply and demand — those who need more services have to pay more for it.
One of the clearest examples of someone who will usually pay higher costs for their auto insurance is a male driver between the age of 16 and 25. This is because:
- Teenaged and young adult drivers do not have the experience behind the wheel to make them truly safe behind the wheel.
- Men are statistically more likely than women to speed or engage in aggressive driving.
- Young drivers are usually among the most at-risk groups to experience speed-related or fatal vehicle accidents.
As a result, it's easy to see why insurers must be careful and cost-conscious when insuring these drivers. They generally have to charge them more money (compared with their parent, for example) to assume the cost risk of being able to cover them.
Still, age and gender are just two of many factors that might influence auto insurance rates. These often include:
Where You Live
If you live in areas with a high cost of living, you'll likely pay more for insurance. Additionally, if you live in communities with high accident risks or high traffic volumes, then you are also likely to pay more. For example, drivers in urban areas usually pay more than rural drivers. Rates can even vary from neighborhood to neighborhood in the same locality.
Your Vehicle Make And Model
Brand new, expensive or specialty vehicles (like sports cars or customized vehicles) will all cost more to insure. There are also certain vehicles that are statistically more likely to be stolen, and thus cost more to insure.
Vehicles with high safety ratings, on the other hand, typically cost less to insure because they are known to present lower accident risks. If you want to save money on car insurance, you may want to purchase an older vehicle with a high safety rating. Keep in mind, as vehicles depreciate with use, your rates might drop too.
Your Credit Score
Credit scores are a way for the insurance company to see how reliable you will be in paying your bills in full and on time. For example, most teenage drivers don't have any credit, which is one of the reasons teens are usually on their parents' policy. Their parents' car insurance premiums will go up significantly by adding a teenage driver to their policy, but it's usually much cheaper overall compared to insuring the teen separately.
Wrecks Can Raise Your Rates
Your driving record is one of the most acute influencers your insurance premiums. A wreck will lead to an insurance payout in most cases, and the insurer will now have proof that you are a cost risk to them. Some statistics estimate that one wreck might raise your rates by as much 41% on average. More severe infractions, like DUIs, often cause rates to skyrocket even more. Nevertheless, it's possible to find insurance carriers that insure nonstandard drivers, and they can help you optimize your benefits.
The more coverage you have, the more expensive your insurance will be. There are some coverages you must have as required by state law. Still, you should always purchase more than just the minimum coverage, because the more coverage you have, the better your benefits will be when you are in need.
Still, you can buy too much insurance, which will leave you paying more for benefits that are not the right fit and too expensive to help you in any way. That's why your agent will work with you to make sure you get the best balance of coverage first, and then help you find the policy that offers you the best value for these benefits.
For more information on factors influencing premiums, contact one of our agents today.
Get A Quote