What Drives Up the Cost of Car Insurance?

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  • Post last modified:December 2, 2022
  • Post category:Blog
  • Reading time:8 mins read

Commuting is essential for every working individual. Even if you work from home or not, you need to have a car to travel (or take public transport). But owning and using a car is more expensive, even though car prices are rising. Why?

The two biggest reasons why owning a car is so expensive are rising gas prices and the rising cost of auto insurance. While you can get an electric vehicle (which is getting very popular and soon becoming the new “normal”), car insurance is something you cannot escape. 

Whether a gas car or an electric car, you must have car insurance to legally drive a vehicle. Why auto insurance rates are rising even though cars are getting safer and cheaper is baffling many people. 

If you have experienced something similar, it is not the car insurance rates rising, but something more personal. Perhaps the rates are rising just for you. Let’s look at all the factors that might be contributing to the rise in car insurance costs for you. 

Car Insurance Costs Varies

Car insurance prices are different for everyone. It is because only some are equal when it comes to the risk of a car accident. Some people are more likely to be in a car accident and make an insurance claim than others. It is the main driving force behind the difference in insurance rates.

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But how do auto insurers find out who carries more risk? There are some factors that affect the likelihood of you getting in a car accident and making a claim. Since these factors are considered by insurance companies, let’s take a look at how these factors can drive up the cost of car insurance. 

Driving Record

The most impactful factor when it comes to car insurance rates, your driving record shows what kind of driver you are. People with bad driving records are considered high-risk drivers, while those with good driving records are preferred by auto insurance companies.

Since a good driver will keep paying an insurance premium and is less likely to be in a car accident and make an insurance claim, car insurance companies offer them low prices. It is quite the opposite with bad drivers. 

What Could be Driving up the Costs?

For your driving record, if you have had accidents in the past, received speeding tickets, points on your driving license, driven rashly, etc., your car insurance rates will hike up. Even the slightest of misdemeanors can result in steep price hikes. 

Driving under the influence, getting in serious accidents, etc., are some of the worst things that can happen to your driving record, skyrocketing your insurance costs to the moon. 

If you have had such violations, the best thing to do is to choose a new car insurance company that charges the lowest for a bad driving record. Compare different companies, and find the best available options in your state. 

For example, if you live in Nevada, look for the best Nevada car insurance company, compare all the options after you get the quotes, and select the most affordable option that offers the best coverage. 

Make and Model of Your Car

The type of car you drive makes a lot of difference in your insurance rates. Luxury, premium cars that cost more to buy are also expensive to repair. Since auto insurance companies pay for the repairs, they’ll charge more to insure your expensive car. 

If you want to save money on auto insurance (and you haven’t gotten a car yet), choosing a cheaper, small vehicle that costs less to repair would be the best option. Some car models are preferred by thieves either because of their resale value or some vulnerability to breaking in. Comprehensive insurance for these models costs more. 

Age, Gender, Location

The three factors that you thought would have no effect on your car insurance rates but do are age, gender, and location. Here’s how they contribute to driving up the cost of car insurance:

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Age: People who are younger than 25 years old are more likely to get in a car accident statistically. It is due to a lack of experience or the desire to break traffic rules. So people under the age of 25 are charged more for car insurance. 

Gender: Statistically, women are less likely to be in a car accident than men. So car insurance companies charge men slightly more than women to offset this risk of an insurance claim. 

Location: Location is an essential factor in deciding your insurance rates. If you live in a locality or city where the rate of car accidents is high or car theft is rampant, then the car insurer will charge you more. 

Credit Score

The credit score is also a factor in determining your auto insurance rates. People with poor credit scores are charged more because, statistically, they are more likely to miss out on insurance premium payments. 

Make sure your credit score is good if you want low car insurance rates. At the same time, there are some states, like California, Massachusetts, etc., that have banned the use of credit scores as a factor in determining insurance rates.

Some states even increase your insurance rates if there is no credit score available. So all of these factors can contribute to the increment of car insurance costs. If your credit score is low, pay the dues on time and improve your credit score to save money on auto insurance as well. 

Past Insurance Claims

Making an auto insurance claim, however small, will increase your car insurance rates. People with insurance claims in the past are charged more for the same policy than people with no insurance claims. 

So if you have made any insurance claims, that could be the reason for the rising car insurance costs. To avoid this price hike, you can either avoid insurance claims for minor accidents or get an accident forgiveness add-on that prevents your insurance rates from going up post-accident. 

Dylan Miller

I am a Chicago native and regular contributor to "Locar Deals" and "Cars Cache". I have a master's degree in English, am an automobile content creation specialist, and have written professionally for a variety of automotive companies over the past few years. I write on a variety of vehicles, from high-end luxury cars to ten-year-old gas guzzlers and everything in between. And I love sharing valuable car buying tips with consumers from all walks of life.

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