Rising prices are everywhere and more people are struggling to buy the things they need. That includes car insurance.
Across the country, car owners are getting renewal notices with rate hikes—sometimes significant rate increases. These sudden changes may leave you wondering, “Why is my car insurance so high?” Understanding the reasons why car insurance is so expensive these days will help you be better equipped to find lower costs.
Why Is My Car Insurance So High?
Your particular driver profile, which includes factors like where you live, your age and your driving record, influences what you pay for car insurance. But rising car repair costs and an increase in disaster-related claims are significant reasons why car insurance rates are surging for many drivers.
Personal and Social Factors
Location
Where you live can play a big role in how much you pay for car insurance. Some states require drivers to carry higher levels of car insurance coverage, which raises costs.
Living in a place where car insurance repairs are more expensive or where there is a high likelihood of theft and vandalism also increases the cost of coverage. Additionally, living in a location prone to severe weather—such as flooding or hail—can contribute to higher car insurance rates.
Whether or not you live in a rural or urban area can also impact how much you pay for car insurance. That’s because the chances of getting in an accident are greater if you live in a large city where there are more cars on the road.
For example, the average annual cost of car insurance nationwide is $2,118, based on Forbes Advisor’s analysis of full coverage car insurance rates by state. But drivers in New York pay the most ($4,769 per year), while folks in Idaho pay the least ($1,021).
Age and Gender
It might not seem fair, but two factors out of your control—age and gender—can help determine the price you pay for auto insurance.
Not all states allow car insurance companies to take gender into account. These six states prohibit the use of gender when pricing auto insurance:
Regardless of where you live or your gender, young drivers generally pay the most for car insurance, largely because of their lack of driving experience. Men also typically pay higher rates than women because males are more likely to engage in risky driving behaviors.
Rates tend to drift lower for all age groups as the years pass. However, beginning around age 65, car insurance costs for senior drivers usually start to climb again.
Marital Status
Married people often pay less for car insurance than their single counterparts. If you’re part of a newly married couple where each partner has a different insurer, it can pay to check with both companies to see which will offer you the best rate.
Even better, compare rates with several companies to ensure you get the best deal.
Education and Occupation
A 2021 Consumer Reports study found that some auto insurance companies quote higher rates to drivers who have less education or lower-paying jobs.
According to the study, these insurers argue that there is a link between these characteristics and the risk the individual driver poses to the insurer. Car insurance companies believe that those with a higher level of education are more likely to file fewer claims, which means they are less expensive to insure.
Credit History
Insurers may use a credit-based insurance score in determining your rate.
In the same way, lenders use a traditional credit score to determine the potential risk a borrower poses, auto insurers use a credit-based insurance score to gauge the likelihood that a driver will file a claim. Car insurance companies say those with bad credit are more likely to file claims. That means drivers with poor credit generally pay more than those with good credit.
Not all states allow the use of credit in pricing car insurance policies—California, Hawaii, Massachusetts and Michigan prohibit it.
Home Ownership
Those who do not own a home typically pay about more than homeowners for car insurance, according to consumer advocacy group reports.
Homeowners also can take advantage of another perk that can lower their costs: Bundling your homeowners and auto insurance policies with the same provider might net you a discount.
Driving Skills
Adding Extra Drivers and Vehicles
Insuring young, inexperienced drivers—such as children in the household who recently have gotten a driver’s license—can be extremely expensive.
It also costs more to insure two or three vehicles than just one. You may get a small discount for insuring multiple cars, which can take some of the sting out of the overall higher cost of insuring more than one vehicle.
Driving Experience and Mileage
Newer drivers—particularly those under 25—tend to pay much higher car insurance rates than other drivers. Yet comparison shopping can assure you don’t spend more than necessary. You can find cheap car insurance for teens and young drivers by comparing car insurance quotes from companies that offer the coverage and features you need.
If you log a lot of miles in your car, the risk of an accident naturally increases. For that reason, insurers also tend to charge higher rates to those who drive a lot.
On the other hand, if you drive very little in a year, you might qualify as a “pleasure use” driver, which can lower your rates. Or, you may qualify for a low-mileage discount.
Speed Ticket and Accident Record
Staying ticket- and accident-free might be the single best way to keep your car insurance rates low. Drivers cited for speeding pay 24% more a year, on average, for car insurance, according to Forbes Advisor’s analysis of how much rates go up after a speeding ticket. But some car insurance companies are more forgiving than others. Geico had cheap rates for drivers with a speeding ticket compared to competitors, our assessment found.
An accident can jack your rate up even more than a speeding ticket: The national average rate increase is 45% for drivers who cause an accident with property damage, according to our evaluation of car insurance rates after an accident.
Car insurance companies assess risk differently, so it’s wise to check rates from other insurers if you have an accident. For example, our analysis found State Farm had the lowest average rate increase (21%) for at-fault property damage accidents.
DUI Record
Being convicted of a DUI can inflict a devastating blow on your efforts to keep car insurance costs low. The national average auto insurance rate hike is 70% for drivers with a DUI, according to Forbes Advisor’s analysis of car insurance rates after a DUI.
You might even struggle to find coverage at all.
There are many good reasons not to drink and drive, and keeping your car insurance costs low is just one more.
Choice of Vehicle and Safety
Car Make and Model
The type of car you drive also can impact your car insurance rates, especially if you buy collision and comprehensive insurance. For example, Forbes Advisor’s analysis of the most and least expensive cars to insure found that the following popular cars are the cheapest to insure:
- Honda CR-V
- Jeep Wrangler Sport
- Subaru Crosstrek
By contrast, here are the most expensive cars to insure, based on the vehicles in our analysis:
- Tesla Model S Performance
- Lexus ES 300H
- Volvo XC90 T8 Inscription
Factors such as the history of claims for a model and the cost to repair the vehicle help determine how much you will pay for insurance.
Financed or Leased Car
When you lease a car, your insurance costs will likely be higher. That is because you don’t own the car—the leasing company does. The leasing company wants to make sure its investment is well-covered, meaning you might pay more.
If you finance a car, your costs should be somewhat lower than if you leased the car. But your lender will still require you to carry enough insurance to protect the investment until the loan is paid off.
If you finance or lease your car, your lender will usually require you to carry full coverage car insurance, which includes comprehensive and collision insurance to pay for damage to your vehicle.
Garage Parking
Parking your car in a garage every night might lower your insurance costs since the car is better protected than if it sat on the street.
Your insurer might even offer a “garage discount” on your collision and comprehensive premiums if you park the car in a garage.
Thefts and Claims in Your Area
Auto insurers review internal and external data that reveals the rate of thefts and other car insurance claims in your area.
If where you live has higher levels of crime or vandalism or a history of residents who tend to file claims, perhaps due to severe weather that consistently comes your way, it can drive your costs higher.
Car Trim Level and Safety Features
If your car features premium trim levels, the repair costs after an accident tend to be higher than for a less flashy car. Your insurance rates likely will reflect that reality.
It’s natural to expect advanced safety features to lower car insurance costs, as such technology helps reduce accidents. However, these features can be expensive to repair or replace. And cars that are more expensive to fix tend to have higher insurance costs.
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Choice of Car Insurance Company
Current Insurance Company and Previous Insurer
Shopping around for car insurance is a great way to keep your costs down. Each insurer has its own formula for setting rates, and it’s likely that your own driver profile will be a better fit for some companies than others.
If you feel like the rate your current insurer charges is too high, it can pay to shop around. Your auto insurer may have hiked rates higher than other companies to compensate for losses it paid out. Comparison shopping will help you find the company that has the most affordable rates right now.
Your experience with a previous car insurance company might also drive your current rates higher. If you filed numerous claims with your last insurer or failed to pay your premiums on time, you may be paying higher rates now for past mistakes.
Insurance Lapse
A lapse in car insurance coverage is an often-overlooked reason why you might pay higher rates. Whether you intentionally canceled your policy or were dropped for not paying your bill, a “gap” in your insurance coverage can serve as a red flag that will push your rates higher.
Forbes Advisor’s analysis of car insurance rates found those with a lapse in coverage pay 25% more. Maintaining continuous coverage is vital if you want to secure the best car insurance rates.
Coverage Selected
The type of coverage you select will have a major bearing on your car insurance costs. A liability-only car insurance policy will net you the cheapest rates, but it provides limited financial protection.
The more types of car insurance you choose, the higher your rates are likely to be.
For example, if you buy optional forms of coverage—such as collision and comprehensive coverage—that are not mandated by law in your state, you’ll pay more.
Note that paying more for robust coverage is often the right thing to do despite the added expense. Although it can be painful to pay higher premiums, those bigger bills may turn out to be a bargain if you get into a costly accident or your car is stolen or damaged by a non-crash event.
Even the cheapest full coverage car insurance policy provides more financial protection than a policy that meets the state minimum requirement to drive legally.
Loyalty and Discounts
Being too loyal to a car insurance company may possibly result in paying higher rates.
Some companies have been caught charging higher prices to customers who they’ve discovered don’t shop around for lower prices. The scheme is called price optimization and is illegal in 20 states, but it could affect you depending on where you live.
Comparison shopping to ensure you’re getting the lowest price available with your current company—or by switching car insurance companies—is the best way to make sure your loyalty to an insurer is not being taken advantage of.
The loss of discounts may be another reason your car insurance costs have risen. If your car is a few years old, your new car discount may have dropped off. Or maybe you got a ticket and lost a good driving discount or forgot to send in the paperwork to verify your child deserves a good student discount. Check with your auto insurer what discounts you have currently and if you’re eligible for any others.
Car Insurance and Claim History
Your personal history of making car insurance claims and your track record for paying your bill on time can both impact your premium rates.
Multiple claims make you look like a risky driver, resulting in higher car insurance costs. And you might pay more if you have not maintained continuous car insurance coverage.
Factors That Are Making Car Insurance So Expensive
In addition to the factors above that can drive an individual’s car insurance rates higher, some societal trends contribute to more expensive insurance costs. They include:
Post-Pandemic Driving Habits
During the pandemic, lockdowns and widespread fear of the Covid-19 virus kept people out of their cars and inside their homes. That meant they were driving a lot less.
In response, many auto insurers lowered the premiums their customers paid.
However, with the pandemic largely behind us, drivers have returned to the roads in big numbers. More drivers on the roads logging longer distances means more accidents—and higher car insurance rates.
Inflation
Nobody in America will be surprised to learn that inflation has spread to all areas of the economy, including car insurance.
The price of both new and used cars has soared over the past few years. The parts used to repair cars have become harder to find—and more expensive—and garages have had to increase wages to attract workers in an era marked by labor shortages.
As vehicles become more expensive to repair and replace, car insurance rates climb as well so insurers can cover future claim payouts.
Climate Change
A changing climate may be contributing to increased disasters—storms, wildfires, flooding—that put more vehicles in harm’s way.
If a higher than average number of claims are paid out due to catastrophic weather events, insurance companies typically look to pass on those costs to their customers in the form of higher premiums. If you live in a state especially hit hard by severe weather, you’ll likely pay more than drivers in states without such extreme weather.
For example, the average cost of car insurance in Florida, which is in the path of numerous tropical storms and hurricanes, is $4,326 per year, while the average cost in Ohio, which typically doesn’t see much extreme weather, is only $1,112.
The Rise of Electric Vehicles
Many experts hope that a transition to electric vehicles (EVs) will lower emissions and slow climate change.
But while EVs may be good for the environment, they can be hard on your wallet, at least when it comes to electric car insurance costs. EVs are more expensive to replace and repair, which means they can be more expensive to insure.
If you plan to purchase an EV, check out our list of the most and least expensive green cars to insure.
Increase in the Theft of Vehicles and Car Parts
Crime has spiked nationwide over the past few years, particularly in bigger cities.
In many places, thieves are targeting catalytic converters—with more than 64,000 thefts in 2022, according to the National Insurance Crime Bureau (NICB). That’s an increase of 290% in stolen catalytic converters from 2020. Cities such as Dallas and San Francisco have been hit especially hard.
Car thefts are also soaring, with the number of thefts topping 1 million in 2022, according to the NICB. These losses drive claims—and car insurance rates—higher.
Broken Supply Chains and Shortages
The pandemic placed stress on supply chains worldwide, slowing the flow of parts and making them hard to find.
The basic law of supply and demand took over from there, causing parts prices to rise and increasing the cost of repairing vehicles. That reality inevitably led to higher car insurance rates.
Slower Claims Affecting Customer Satisfaction
Customer satisfaction with insurers is sinking fast, according to a J.D. Power survey of more than 8,000 auto insurance policyholders. Many drivers are unhappy with how long today’s claims take to process.
While this doesn’t directly translate to higher auto insurance costs, it does create conditions that leave drivers—who already are unhappy with rising insurance premiums—dissatisfied with their insurance coverage.
One way slower claims can cause your car insurance rates to go up is related to the expense for rental cars insurers pay for while drivers wait for repairs or to find a replacement for their totaled car.
A report by Enterprise Rent-A-Car tracks how long rental cars were used by drivers waiting for their cars to be repaired after accidents. The study finds the length of a rental car for non-driveable vehicles after a collision is 26 days—an average of five days of that spent waiting on an insurance company to approve repairs. If a car is totaled, the length of rental is a bit better at 17 days.
How to Reduce Car Insurance Costs
As you can see, many factors are pushing car insurance rates higher. Fortunately, you can fight back by taking steps to lower your premium costs.
Some things you can do to trim the tab for car insurance include:
Choose the Right Car
Before you purchase your next car, do a little research to find out how much it might cost to insure the models you are considering buying.
The cost of insurance shouldn’t be the only factor determining which car you buy. However, you will have to pay for insurance for as long as you own the car, so it helps to purchase a vehicle that keeps this ongoing cost relatively low.
Take Driving Courses and Drive Carefully
Staying accident- and ticket-free is one of the best ways to keep your car insurance rates low. So, use common sense out on the road.
You also might benefit from taking a course that will help you sharpen your driving skills. Insurers such as Amica and American Family offer discounts on car insurance to drivers who complete this type of course. You may have to meet a minimum age requirement with some insurance companies, such as age 55, to receive a defensive driver discount.
Maintain a Good Credit Score
In many—although not all—states, insurers may look at your credit standing when setting your insurance premiums. In states where credit is looked at, drivers with good credit tend to see lower car insurance costs.
But even drivers with bad credit can save on car insurance by shopping around for the lowest rates. The best car insurance for drivers with bad credit will include the coverage you need at a price you can afford.
Compare Multiple Car Insurance Quotes
Comparing car insurance rates is one of the best ways to reduce auto insurance costs.
Each insurer has its own formula for how it sets rates. That means it’s possible that you can find a car insurance company that will charge you less than your current insurer does.
It is easy to get comfortable with your insurer and stick with the company year after year. But comparing car insurance quotes at least annually can help you discover if there is an insurer who is a better match for your driver profile.
For instance, we analyzed rates for good drivers—those without tickets or accidents on their record—and found a difference of nearly $1,400 between the cheapest and most expensive companies. Auto-Owners is the cheapest car insurance company at $1,628 a year. Allstate is the most expensive at $3,000 a year. These car insurance costs show the power of shopping around to get the best rates.
Choose the Right Coverage and Deductible
A great way to lower auto insurance costs is to choose a higher car insurance deductible. When you do so, your insurer normally lowers your car insurance premiums.
For example, increasing your car insurance deductible can net you savings of 7% to 28%, according to Forbes Advisor’s analysis of how much you can save by raising your car insurance deductible.
Another way to cut costs is to drop coverages you can live without. If your car is aging and you have paid off your car loan, you might want to consider dropping collision and comprehensive coverage altogether.
However, remember that doing so means you’ll pay out of pocket for any damages your car incurs after an accident.
Bundle Auto and Home Insurance
Many insurance companies offer policyholders a discount if they purchase both their auto and homeowners policies from the insurer, called bundling. The average bundle discount is 14%, based on Forbes Advisor’s analysis of the best home and auto bundle companies.
But bundles may not always be the best route to savings. Shop around and compare rates for both types of coverage. The Insurance Information Institute notes that even if you are offered a bundling discount, it’s possible you could save money by purchasing your homeowners insurance and auto insurance from different companies.
Check for Low-Mileage Rates and Pay-Per-Mile Programs
Being a low-mileage driver can earn you lower car insurance rates. If you drive fewer than 11,000 miles annually and you’re hunting for cheap car insurance, Nationwide, Travelers and USAA are worth considering, based on Forbes Advisor’s ratings of the best low-mileage car insurance companies.
You can also check out pay-per-mile car insurance. These programs charge a daily or monthly rate and then a per-mile charge that can yield lower rates for those who don’t drive a lot.
Discounts
In addition to the discounts listed above, you may qualify for other savings. For example, some insurers offer discounts for paying your bill online or going paperless. Many offer discounts to those who have cars with specified types of safety equipment, such as anti-lock brakes.
Other common car insurance discounts include those for insuring more than one car and for student drivers who maintain good grades.
Pay Premiums Upfront
Finally, you might get a break on your premium costs if you agree to pay for your entire policy term (typically six months) all at once rather than paying for your coverage in installments over time.
A Forbes Advisor survey of top insurers found that you typically can save anywhere between 6% and 14% with this paid in full discount.
Best Car Insurance Companies 2024
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