Why Is Car Insurance So Expensive, Explained

You’re reviewing your monthly expenses and combing through the list and aside from food and housing, there’s one number that jumps out at you — your car insurance. If you’ve checked your car insurance bill and wondered “Why is my car insurance so high?!”, there are a variety of reasons. Read on to learn what factors make up your car insurance rate and why your car insurance might be expensive.

Why is My Car Insurance So High? | Metromile

The type of car insurance you have 

If you look at your bill and let out a deep sigh and think “Why is car insurance so expensive?” it might have something to do with the type of insurance you have. 

Traditional car insurance rates take into account a number of factors that we’ll go over later, but you typically pay a standard monthly premium. You pay the same amount regardless of how much you drive. 

In many cases, that doesn’t make the most sense. When you drive more, you’re taking on more risk. But the converse is also true. If you drive less, you take on less risk and there is less wear and tear on the vehicle. Given we’re in pandemic times and many people have made the shift to working from home, you might be driving less than you ever have. Why wouldn’t you want to be rewarded for that?

The good news is you can be if you use pay-per-mile auto insurance. Pay-per-mile auto coverage with Metromile offers you the ability to pay a low base rate each month while paying just several cents for each mile you drive up to 250 miles per day. You pay for gas by the gallon, why not pay for insurance based on the miles you actually drive and not for anything more? 

Using Metromile, on average customers have saved $741 per year*. Imagine putting that money in the stock market, toward your student loans, or for a fun vacay. The type of insurance you have can heavily impact how much you pay for car insurance. 

Your location 

You know the saying “location, location, location” when it comes to real estate evaluations? Your location and where you live affect not only real estate values but also your car insurance. 

Consider how where you live might add additional risk factors that play into your car insurance rate. For example, do you live in a congested, population-dense city where the streets are narrow, parking is hard to come by, and break-ins are fairly commonplace? Or do you live somewhere more rural, where the streets are wide, there are more covered garages, and fewer instances of theft and damage? The weather where you live may also impact the rate as well. 

As you can see, there are many factors that are location-dependent that ultimately affect your car insurance rate. Car insurance providers use data from your zip code to make risk assessments about your area. 

How old you are 

In some cases, you might think age is “just a number” but that’s not the case when it comes to car insurance. If you’re a younger driver, you’re much more likely to have a higher car insurance premium compared to someone with more years of experience under their belt. 

Why? Well, it comes down to experience and risk. As a younger driver, you have less experience on the road and have a higher likelihood of an accident. In fact, according to CDC data, car accidents are the second leading cause of death for teens in the United States. 

The risk of dying in a car accident is about three times higher for teens ages 16 to 19 compared to drivers who are 20 and older. Teen male drivers within the 16 to 19 age group were two times more likely to die in a car accident compared to female drivers. On top of that, the risk of a car accident is higher for teens within the first few months of getting a driver’s license. 

Your driving history 

If you’re scratching your head thinking “Why is car insurance so expensive?” the first thing you want to consider is your driving history. Your driving history, or driving record, may play a big role in your car insurance rate. 

For example, if you have an at-fault accident or a speeding ticket on your record, that can affect how much you pay for car insurance. In fact, the financial site Bankrate.com states that drivers can see an average car insurance premium increase of 38% after an at-fault accident. 

If you have a DUI or DWI, that number could be even higher. If you have many back-to-back incidents, your car insurance provider may even drop you, according to the Insurance Information Institute (III). 

The type of coverage you have 

When you get car insurance, there are different types of coverage you can get. For example, if you get comprehensive coverage and collision coverage, that will be at a higher price than liability only. Comprehensive, collision and liability in one policy can protect your finances in case of an accident. 

Those policies are higher priced because they cover more and help recoup costs for damages you may incur in case of an accident. Typically, you simply pay the car insurance deductible and your car insurance provider covers the rest. 

According to financial site WalletHub.com, liability coverage is on average 64% lower on its own than when combined with collision and comprehensive coverage. Most states require minimum liability coverage. While that may be more affordable, you also get what you pay for. So if you get in an accident, the financial burden may fall mostly on you. 

 Credit-based insurance score 

Your credit score and credit report aren’t just for applying for a loan or credit card. In fact, some states allow use of your credit information as a factor when determining car insurance premiums as part of creating a credit-based insurance score. The reasoning is that those with poor credit or no credit typically have a higher likelihood of filing a claim, according to the Insurance Information Institute. 

If you think this is an unfair metric to determine credit-based car insurance scores, there are some states that agree and have banned the use of credit scores in some capacity as it relates to car insurance. 

If you’re not in those states, the best way to boost your credit score is to make payments on your loans on time and in full, when possible. Some states may not use your credit score to set the car insurance rate but may have restrictions based on whether your policy can be canceled or non-renewed due to your credit. 

Your car’s make and model 

Do you dream of driving a corvette or mustang? You may end up paying more for car insurance because of it. In fact, your car’s make and model affect your car insurance rate. All of these factors play into the safety of the vehicle as well as how likely they are to get stolen. 

Cars that tend to be fancier and more expensive also have higher rates, as do newer cars and electric cars. So if you’re thinking of buying a car, you might want to consider how the make and model will affect your car insurance rate. 

Your insurance record 

If you want to know why is car insurance so expensive, you also want to consider your insurance record. Having car insurance is important as a driver. If there are gaps in coverage, even for a short period of time, it may impact your car insurance premium in certain states. If you switch car insurance providers, make sure there isn’t a lapse in your car insurance coverage. 

The number of miles you drive 

Do you drive a lot? That could impact your car insurance premium as well. Every time you get on the road, you’re gambling a bit with safety. The more miles you drive, the more risk you have which insurance providers have to take into account. 

When you sign-up for car insurance, you might have to provide the number of miles you drive per year which can affect your rate. If your mileage shifts, it makes sense to contact your car insurance provider. If you don’t drive that often, pay-per-mile insurance can make a lot more sense for your budget.

The bottom line 

If you’ve ever wondered “Why is my car insurance so high?” now you know there are many factors that affect how costly your premium is. There are some things that are out of your control but there are other things you can do to make car insurance more affordable. If you’re a low-mileage driver, check out pay-per-mile auto insurance. Don’t pay a penny more than you need to and only pay for the miles you drive, along with an affordable base rate. Get your free quote today.

​​Melanie Lockert is a freelance writer, podcast host of the Mental Health and Wealth show, and author of Dear Debt. She’s a cat mom to two jazzy cats, Miles and Thelonious, an amateur boxer, music lover, and needs coffee to function.

*Average annual car insurance savings by new customers surveyed who saved with Metromile in 2018.