Are you a good driver wondering why you’re still paying quite a bit each month for car insurance? There are a number of factors that go into how your overall premium is tallied up and some components might not seem so apparent at first glance.
We are all required by the government to carry auto insurance, so there’s really no getting around it. However, understanding the various factors could help you make small changes that add up big in the long run. Here are a few of the top reasons why your car insurance is so expensive.
1: Your Past Driving Record and Age
Of course, your past driving record plays a huge role in your annual car insurance premium. If you’ve had numerous tickets or accidents in the last few years, your carrier is going to worry if you create unnecessary risk while on the road.
Likewise, your age plays a big role, too. Inexperienced teenage drivers don’t usually have enough past history to make immediate decisions for safety while on the road. Seniors are typically safer, but there comes a point when physical barriers make operating a car unsafe. Insurance companies understand this and try to adjust policies according to the increase chances of risk.
2: The Type of Car You Drive
The type of car you drive has a large part to do with how much you pay for car insurance. Why? Your auto insurance company has to assume that at some point you’ll be involved in an accident and file a claim. They already know how much parts and labor cost for your make and model, so they factor this into your premium.
Foreign cars or expensive brands often have higher insurance costs than domestics. And that old rumor that the color of car you drive affects your rates? Completely untrue. Some carriers never even ask.
3: The Zip Code You Live In
Another reason for high car insurance costs is where you live. Again, car insurance companies are always weighing the risk of you filing a claim. If data from your local neighborhood shows a high number of thefts, you’re likely going to get stuck with a more expensive insurance rate.
Natural disasters also play a role in this. If your area is typically hit by tornadoes or major flooding on a yearly basis, it is calculated into your premium within a few years after the data is collected.
4: Your Credit Rating
Your credit rating has a big factor on how much your auto insurance costs. Over decades, companies have linked the ability to pay your bills on time to an overall higher responsibility and an increased likelihood of safe driving. Plus, people with higher credit scores have a much lower chance of skipping monthly installment payments.
The only real way to keep this from affecting what you pay for car insurance is to consistently monitor your personal reports for errors, keep balances low, and always pay on time. The benefit is that you won’t just see a lower premium, your overall financial health will rise.
5: Who Lives in Your Household
Another factor is the people who live in your household, including teen drivers and spouses or roommates with horrible driving records. In most cases, your insurance company expects you to add to your policy anyone living in your household that has access to your keys and could possibly drive your vehicle. Your only options are to pay the higher premium or add an exclusion, which states if they are involved in an accident while driving your car, the policy is null and void.
This can be a difficult one to swallow for a lot of people who don’t want to pay higher rates. Normally, they end up not telling their carrier that the person even lives in the household. When an accident happens and that person is driving, an investigation is done into what happened. If it turns out you didn’t speak up about their access to the car, you could be accused of insurance fraud. Yikes!
7: If You’ve Had a Lapse in Coverage
If you’ve had a significant lapse in coverage in the past, you might be paying higher rates for car insurance now. Again, this goes back to insurance companies and a reliance on personal responsibility. Those who let their auto insurance cancel due to non-pay or other factors often let it happen again, which is not what your carrier wants to happen.
Instead, they charge you a higher premium upfront with the promise of a lower figure when the policy renews in the future with no missed payments. It may not seem fair, but this is often how the process works.
8: What Discounts You Qualify For
Finally, the discounts you qualify for often have an impact on how much you pay for car insurance. If you own a home or rent where you live, it is always a good idea to keep your homeowners or renters insurance coverage with the same carrier as your car. This can sometimes mean huge discounts for both types of policies, which significantly lowers how much you pay for car insurance.
Do you have questions about your current auto insurance premium or want to see about getting a better rate? Please get in touch with our team today to schedule a no-obligation policy review.
