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Why is auto insurance expensive?

Many factors — related to driving and otherwise — lead to expensive auto insurance premiums. Age, driving record, credit score and insurance history are factors that contribute to car insurance rates.

We outline below some common reasons auto insurance rates are high, along with some ways to reduce your insurance rates.

  1. Your credit history
  2. Your age
  3. Your driving record
  4. Your location
  5. Your company

 

1. Credit history

Credit score is a primary contributor to a driver's car insurance rate. Federal Trade Commission (FTC) studies show drivers with poor credit file more claims than drivers with high credit scores (and file more costly claims). These drivers pose considerable risk to car insurance companies. On average, drivers with credit ratings in the "Very Poor" tier (300-579) pay $910 more for a six-month policy than do drivers with credit scores in the "Exceptional" range (800-850).

credittier_avgpremiums.png Each tier of credit score improvement comes with an average savings of 17% — or $193 per six-month term — on auto insurance premiums. If you have a clean driving record but think your car insurance rate is too high, check your credit score.

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2. Age

Car insurance companies sometimes conflate age and driving experience. Drivers younger than 25 often pay more for car insurance than do older drivers, due to a perceived lack of driving experience. A young driver between the ages of 16 and 24 will pay 139% more for car insurance than will a driver between the ages of 25 and 75.

agegroups_averagepremiums.png As a driver ages, their auto insurance premiums typically decrease. Drivers see big savings on their 19th, 20th and 25th birthdays, specifically. Young drivers should be especially mindful of displaying good driving habits. A bad driving record coupled with an age of less than 25 will lead to high premiums.

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3. Driving record

A driver's auto insurance premium could be expensive because of recent claims or driving violations. Speeding tickets, at-fault accidents, and DUIs have major implications on insurance premiums. After any violation or claim, an insurer will upcharge a driver for three to five years. In California, drivers can be charged for up to 10 years after being convicted of DUI.

Below are some of the most expensive driving violations and their impact on rates. For example, a driver convicted of a hit-and-run should expect their premium to increase by an average of $606 per six-month period.

byviolation_avgpremiums.png

Comprehensive claims, generally considered to occur outside of the control of the driver, increase premiums by lesser amounts. On average, a comprehensive claim raises rates by $36 every six months.

Not-at-fault accidents can also lead to elevated rates. Even when a driver was not at-fault in a collision, car insurance companies raise rates to cover the cost of the claims adjuster and overhead fees. Even without filing a claim, driving history could be a reason for high auto insurance rates.

Accident

6-Month Insurance Rate

None $774
Comprehensive claim $810
Not-at-fault accident $827

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4. Your location

Car insurance is regulated at the state level and priced at the ZIP code level. A driver could end up paying high car insurance rates because of claim frequency in their neighborhood or because of legislation in their state. Let's look at some of the most expensive states for car insurance.

 

Michigan

Michigan is a notoriously expensive state in which to insure a vehicle. Michiganders pay 70% more than the national average for car insurance.

Three primary factors contribute to Michigan's high auto insurance rates:

  1. Michigan requires no-fault insurance with unlimited Personal Injury Protection.
  2. The insurance coverage options offered in Michigan attract insurance fraud, litigation fees, and expensive healthcare bills.
  3. Insurance companies have to charge higher premiums in Michigan to earn a profit.

Michigan’s four closest neighbors enjoy comparatively affordable auto insurance rates:

Michigan vs. Neighboring States 6-Month Insurance Premium
Ohio $463
Wisconsin $540
Indiana $594
Illinois $642
Michigan $1,267

 

Michigan's average car insurance rates are 164% more expensive than the combined average of Illinois, Wisconsin, Indiana and Ohio. Even with a great credit score and no claims, living in Michigan can cost you.

 
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Florida

Florida is the third most expensive state in which to get car insurance, with a statewide average of $1,162 for a six-month policy. The major reason for this is the insurance companies' loss-to-profit ratio in Florida. Hurricanes and flooding result in car insurance companies paying out heavy claim losses on a regular basis.

Another reason why Florida is more expensive than average is its no-fault insurance. Although it does not require as much coverage as Michigan’s no-fault coverage, the state requires drivers to carry Personal Injury Protection at a minimum of $10,000.

Florida's Neighboring States 6-Month Premium
Alabama $648
Georgia $769
Florida $1,162

 

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California

California is the seventh most expensive state for car insurance, with an average six-month premium of $911. Unlike Florida and Michigan, California is not a no-fault state and currently maintains very low liability coverage requirements. California is an expensive state for car insurance due to its population density and claim-to-profit ratio.

Cities with high population density — and thus more vehicles — are more likely to have more accidents and claims, which in turn impacts insurance premiums. Claim payouts via wildfires in California lower the profit-to-loss ratio for insurers. 

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5. Your car insurance company

You can't swap states simply because Texas has a higher cost of car insurance than Oklahoma. Nor can you improve your credit score overnight. The only instant action you can take to lower your premium is to switch car insurance companies, as one of the primary reasons you might be paying too much for car insurance is who you're insured with. Some companies are more expensive than others, no matter your driving profile.

Why is car insurance so high for you? Enter your ZIP code below to calculate your rates and receive quotes from major auto insurance companies.

 

Find an affordable insurance company: compare rates online.

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Ava Lynch
Ava LynchSenior Analyst

Ava worked in the insurance industry as an agent for four-plus years.

Ava currently provides insights and data analysis as one of The Zebra's property and casualty insurance experts. Her work has been featured in publications such as U.S. News & World Report, GasBuddy, Car and Driver, and Yahoo! Finance.

About The Zebra

The Zebra is not an insurance company. We publish data-backed, expert-reviewed resources to help consumers make more informed insurance decisions.

  • The Zebra’s insurance content is written and reviewed for accuracy by licensed insurance agents.

  • The Zebra’s insurance content is not subject to review or alteration by insurance companies or partners.

  • The Zebra’s editorial team operates independently of the company’s partnerships and commercialization interests, publishing unbiased information for consumer benefit.

  • The auto insurance rates published on The Zebra’s pages are based on a comprehensive analysis of car insurance pricing data, evaluating more than 83 million insurance rates from across the United States.